In-substance defeasance

In-substance defeasance

Process through which debt is removed from the balance sheet but not canceled.

In-Substance Debt Defeasance

A provision in a loan removing it from a balance sheet if cash or a portfolio is set aside for debt service. Usually, defeasance occurs when a borrower owns a portfolio of Treasury securities whose coupons are used to service a debt. When the borrower has set aside sufficient assets to cover the debt, the debt does not need to be recorded on a balance sheet.
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In-substance defeasance no longer is considered to constitute an extinguishment of debt.
If debt was considered to be extinguished by in-substance defeasance under FASB 76, Extinguishment of Debt, prior to the effective date of FASB 125, a general description of the transaction and the amount of debt that is considered extinguished at the end of the period so long as the debt remains outstanding.
Statement 76 allows the derecognition of a liability when you meet certain criteria, for example when you place assets in an irrevocable trust to satisfy the cash flow requirements (principal and interest) of a specific debt (the procedure is referred to as an in-substance defeasance of debt).
Other differences arise in those areas in which bank reporting standards are intended to be more conservative than GAAP, such as in the areas of asset sales with recourse, futures contracts, excess servicing, and in-substance defeasance of debt.
HNT) to 'BBB+' from 'BB+', following an in-substance defeasance of the notes.
Extinguishing debt, through in-substance defeasance, marks the last major element of the debt reduction program we announced on May 3 when we discussed our intention to refocus our company on its imaging business and to sell the non-imaging health businesses," said Harry L.
a wholly owned subsidiary, has completed and in-substance defeasance of all outstanding 8 3/4 percent and 9 percent debentures due 2001, with an aggregate current outstanding principal amount of $60 million.
6 million to complete a partial in-substance defeasance of principal and interest with respect to First Mortgage Notes maturing in December 1996.
The charges related to an extraordinary loss from an in-substance defeasance of debt and settlement of a civil suit that were both effected in the fourth quarter of last fiscal year.
76, Extinguishment of Debt, the company has reflected the in-substance defeasance of the 13 Percent Subordinated Notes in its Sept.
As previously reported, IDEX issued $75 million in new 10-year senior subordinated notes at an interest rate of 9-3/4 percent during the third quarter of 1992, and arranged for the in-substance defeasance of its former $50 million issue of 15-3/8 percent senior subordinated debentures.
Relationships that raise accounting issues include those between hedging and hedged instruments, assets and liabilities that can be set off against each other, secured debt and securing assets (either with or without recourse to other assets of the borrower), options that are "covered" by particular assets and in-substance defeasances and other dedications of specific assets to the settlement of specific liabilities.