Covenant to pay

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You might wonder what this is all about, especially if you encounter it wrought from the inscrutable curled iron prose of a magic circle capital markets swat team.

So I think it is this. This is reverse engineering logic from text...

There is a trustee for noteholders. The covenant gives the trustee legal standing to sue/act for noteholders on a contract that it is not otherwise party to on the noteholders behalf. That is discharged when issuer pays away to the agent - it has done everything if can do. But if the agent then fails before paying noteholders the obligation springs back. This is so issuer has a loss it can sue the agent for... If it was totally discharged vis a vis noteholders then the (insolvent) agent gets a free pass.

The holding the covenant on trust for noteholders I guess is extra security and allows noteholders to trace funds Vs trustee I'd it does a bolter

But honestly what a shower.

See also

• Signal versus noise