What a Borrower Should Know Before Defeasing

Defeasance is the process through which a borrower is released from the obligations of its debt. The borrower purchases a portfolio of government bonds to serve as replacement collateral for the debt and to generate the cash flows required to meet the future obligations of the debt. While the process can be summarized in a few lines, in practice it is very complex, involving a large number of parties with competing interests. Having an independent, experienced advisor on the borrower’s side is important to ensuring an on-time, cost-effective, and complication-free close.

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