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Loan Impairment and Lender Recourse

Covers Borrower default and what a Lender can do about it
Conditions vary but generally speaking a default is triggered by:
  • Failing to make interest and principal repayments in whole and on-time
  • Breaking a covenant in the loan terms such as a collateral coverage ratio
If the Borrower doesn't pay back all debt and close all positions by the end of the term (expiry date), the Borrower has defaulted. The status of the Line of Credit will be changed to liquidatable and the Arbiter will proceed to liquidate whatever collateral/security is available.
Remember, no recourse is possible if a Line of Credit is unsecured.
Recoverable funds will be:
Any remaining funds not drawn down
Equals
The amount deposited by Lenders
+
any accrued interest repaid by the Borrower to the Line contract but not yet withdrawn by Lenders
-
the amount that a Borrower has drawn down
Funds recoverable via the Spigot
In addition, if deployed, the Spigot contract will siphon 100% of Revenue Tokens that continue to be available from the Borrower's Revenue Contracts.
Funds recoverable from escrowed token collateral
In addition, token collateral put up as security for the loan will be liquidated.
If a Borrower is permanently incapable of repaying debt then the status of the Line will be changed to 'insolvent' by the Arbiter.
Lenders and Borrowers can of course at any point renegotiate terms.
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