What Is Loreto Cera
Loreto Cera is a term used in structured finance and credit markets to describe a specific type of credit-linked instrument or tranche. It typically refers to a mezzanine or junior layer within a securitized structure, such as a collateralized loan obligation or credit-linked note. The name is often associated with Italian financial documentation and structured product conventions.
How Loreto Cera Works
In a typical structure, senior tranches receive payment first, while Loreto Cera tranches absorb initial losses. Investors in this layer seek higher yields in exchange for taking on greater credit risk. Cash flows from the underlying portfolio are passed through according to a waterfall priority, with Loreto Cera tranches sitting between senior and equity positions.
Use Cases and Market Context
Loreto Cera structures are commonly used by banks and institutional investors to transfer credit risk, free up regulatory capital, or provide targeted exposure to corporate loans or bonds. They are often seen in European structured credit markets, particularly in syndicated loan and private credit securitizations. For broader context on structured finance, see the European Securities and Markets Authority overview at ESMA structured finance.
