Defeasance definitions
| Word backwards | ecnasaefed |
|---|---|
| Part of speech | Noun |
| Syllabic division | de-feas-ance. |
| Plural | The plural of defeasance is defeasances. |
| Total letters | 10 |
| Vogais (2) | e,a |
| Consonants (5) | d,f,s,n,c |
What is Defeasance?
Defeasance is a term commonly used in finance and real estate to refer to the extinguishment of a debt or obligation. It involves setting aside a sum of money or securities in order to satisfy future payments and essentially remove the liability from the balance sheet.
How Does Defeasance Work?
When a borrower wants to defease a loan, they typically purchase securities - often government bonds - that will generate enough income to cover the remaining debt payments. Once the securities are acquired, they are placed in a trust and the borrower is effectively released from the obligation to repay the debt.
Benefits of Defeasance
One of the main benefits of defeasance is that it allows borrowers to remove a liability from their balance sheet without actually paying off the debt in full. This can be particularly advantageous in situations where the borrower wants to refinance or sell the property associated with the debt.
Key Considerations
It's important to note that defeasance can be a complex process that involves legal and financial expertise. Additionally, there may be costs associated with defeasance, such as the purchase of securities and trustee fees. Borrowers should carefully weigh the benefits and costs before deciding to pursue defeasance.
Overall, defeasance can be a useful tool for borrowers looking to manage their debt obligations in a strategic manner. By setting aside assets to satisfy future payments, borrowers can free up capital and potentially take advantage of new opportunities. However, it's crucial to fully understand the process and implications of defeasance before moving forward. Defeasance can offer financial flexibility, but it is not without its complexities and considerations.
Defeasance Examples
- The defeasance of the mortgage allowed the borrower to obtain clear title to the property.
- The company used a defeasance to retire their outstanding debt early.
- By executing a defeasance agreement, the landlord was able to release the tenant from their obligations.
- The defeasance clause in the contract provided protection to both parties in case of unexpected events.
- The defeasance of the lease required the tenant to surrender the premises in good condition.
- The defeasance of the lien allowed the property owner to sell the house without any encumbrances.
- Through defeasance accounting, the company was able to remove the liability from its balance sheet.
- The defeasance of the lawsuit resolved the legal dispute between the two parties.
- To secure financing for the project, the company had to set up a defeasance account.
- The defeasance provision in the trust indenture protected the bondholders' interests.