No debt due

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When pondering limited recourse language, more passionate students may be interested to learn of an arid discussion practitioners once had about whether it was better to say, upon exhaustion of all assets, that the SPV’s debt was “extinguished”, or “not due” in the first place. This was weakly supported by coal-face lawyers at places like Linklaters (in the “no debt due” camp) and Clifford Chance (“extinction”), vociferously propelled by their partners, but left the rest of us with a hard-to-articulate but quite persistent sense that there really ought to be better things for masters of the universe of structured finance to worry about. Such as, “how on Earth is it that people who fixate about things as tedious as this get paid so much?”

As with all wanton acts of pedantry, this one has an intellectual grounding, but it is so brittle it will make you angry: the concern about “extinction” is that it implies that, at that very instant that final settlement drop drained from the expiring espievie’s veins, the spectral debt was still there, in an amount which, Q.E.D., the company was, theoretically, at that frozen moment in the ineffable hereafter, unable to pay — until in the next infinitesimal subdivision of time, whereupon the debt finally vanished. The concern? That, for just that fleeting angel’s blink, and no more, the espievie was technically insolvent. I know. I know: don’t @ me, folks.

These people prefer to say “no debt is due” on the supposition that this magic spell can have some spooky retrospective effect, banishing phantoms, re-rendering the fresco of time on which the great redeemer has already daubed an arrow, or some such thing.

What difference does it make, in point of practical fact? None at all.

See also

• Limited recourse