Term:
Debt defeasance; collateralized (debt) defeasance
Definition:
Extinguishing debt through the provision of a financial asset (e.g. zero coupon bond) to be held in a trust account as collateral against the principal of the debt. The face value and maturity of the collateral instruments are designed to match those of the debt being defeased so that the proceeds of the collateral instruments at maturity may be used to fully repay the principal in a single balloon payment.
Domain:
Finance
Source:
World Bank: Glossary of Finance and Debt