limited recourse debt

Definition

An obligation which gives the creditor the rights to retain a limited amount of the debtor's assets, in the event of default. Such an obligation means the debtor will generally pay a lower interest rate as compared to unsecured bonds. Its safety position is between an unsecured and secured obligation, which may eventually shift towards secured in due course. For example, a power plant needing finance for its projects may agree upon payment of 35% of the principal amount in the event of default.
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limited purpose trust company limited referral agent