Glossary
Technical default
Category —
Bond Issuing Process and Bond Circulation
Technical default is a situation in which the borrower violated the loan agreement by not making another payment to the debt holder, but physically they can fulfill this agreement and they have the financial resources to pay off the debt.
In practice, a technical default is performed only by those issuers that are really experiencing financial difficulties, because in case of a technical default, the issuer immediately loses its reputation as a stable borrower, the opportunities for further placements are reduced, and potentially future issues will be placed at a higher rate.
After the delay in payment of the bond, a grace period begins (the period within the framework of a technical default), during which the issuer must pay off the debt so that the security does not go into the “default” status. Quite often, a technical default does not end with the bankruptcy of the borrower. After overcoming difficulties during the grace period and paying off their obligations, the issuer can establish work and further prevent violations of obligations.
Information on debt servicing and technical defaults for specific issues can be viewed on the bonds page in the Debt Servicing section. An example of a security on which a technical default occurred that did not turn into default status: https://cbonds.com/bonds/660061/.
The past defaults on bonds can be viewed in Corporate Actions section.
In practice, a technical default is performed only by those issuers that are really experiencing financial difficulties, because in case of a technical default, the issuer immediately loses its reputation as a stable borrower, the opportunities for further placements are reduced, and potentially future issues will be placed at a higher rate.
After the delay in payment of the bond, a grace period begins (the period within the framework of a technical default), during which the issuer must pay off the debt so that the security does not go into the “default” status. Quite often, a technical default does not end with the bankruptcy of the borrower. After overcoming difficulties during the grace period and paying off their obligations, the issuer can establish work and further prevent violations of obligations.
Information on debt servicing and technical defaults for specific issues can be viewed on the bonds page in the Debt Servicing section. An example of a security on which a technical default occurred that did not turn into default status: https://cbonds.com/bonds/660061/.
The past defaults on bonds can be viewed in Corporate Actions section.
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