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In-Substance Debt Defeasance

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in-substance debt defeasance

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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