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Covenant to pay: Difference between revisions
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The trustee does not hold the note, so otherwise would have no rights under it. This covenant gives the trustee legal standing to sue/act for noteholders. | The trustee does not hold the note, so otherwise would have no rights under it. This covenant gives the trustee legal standing to sue/act for noteholders. | ||
Also, the issuer makes its payments to noteholders via a [[paying agent]] (normally, a bank). There is an odd interregnum between the issuer paying its agent, and the agent paying the noteholders, which it does through [[Clearing system|clearing systems]] | Also, the issuer makes its payments to noteholders via a [[paying agent]] (normally, a bank). There is an odd interregnum between the issuer paying its agent, and the agent paying the noteholders, which it does through [[Clearing system|clearing systems]]. There are [[Stupid banker cases|fun recent cases]] about this — in the context of a loan agency arrangement, about what happens if an agent pays money away ''before'' the debtor pays it — especially when it then turns out that the debtor ''can’t'' pay it. | ||
The issuer’s covenant is discharged by paying the principal it owes to its agent. At that point it has done everything it can do. | The issuer’s covenant is discharged by paying the principal it owes to its agent. At that point it has done everything it can do. | ||
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{{Sa}} | {{Sa}} | ||
*[[Signal versus noise]] | *[[Signal versus noise]] | ||
*[[Stupid banker cases]] | |||