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Covered Default
In the event of a default on any Approved Eligible Transaction that is validated by the independent 3rd party verification agent, the lesser of 1) the coverage limit specified in that Approved Eligible Transaction's Reserve Agreement and 2) the Coverage Ratio will be applied to the principal amount of the Approved Eligible Transaction and will be paid to the Approved Eligible Transaction's investors.
Funds within the staking pools will be locked from the moment an event of default has been triggered through the time the coverage amount is paid to the Approved Eligible Transaction's investors. Any recovery amounts collected for the benefit of Approved Eligible Transaction's investors from the distinct asset pool, credit enhancements or legal settlements will be relinquished to Anzen treasury as specified in the Reserve Agreement.
The Default Payment waterfall is as follows:
  1. 1.
    First, the default amount will be paid from Anzen protocol owned liquidity, up to a maximum of 20% of the treasury balance.
  2. 2.
    Remaining default balances will be paid on a pro rata basis from the staking pools balances
The procedures below ensure a smooth, transparent and validated process for the benefit of all Approved Eligible Transaction parties, ANZ holders and veANZ holders.

  1. 1.
    An event of default is triggered as specified within the Approved Eligible Transaction's Debt Instrument's documentation
  2. 2.
    The event of default is communicated to Anzen through any of the following channels:
    • Any counterparty to the Reserve Agreement is made aware and notifies the rest of the counterparties per the notification procedures disclosed in the Reserve Agreement
    • An event of default is uncovered by the independent 3rd party verification agent in conjunction with their ongoing Eligibility Criteria compliance checks
    • Any ANZ, veANZ holder or Advisory Board member notifies Anzen
  3. 3.
    Anzen will lock funds within the staking pool
  4. 4.
    Anzen will determine the coverage amount by calculating the lessor of:
    • The product of the coverage limit specified in the Reserve Agreement and the principal amount of the Approved Eligible Transaction
    • The product of the Coverage Ratio as of midnight ET on the day prior to the event of default having occurred and the principal amount of the Approved Eligible Transaction
  5. 5.
    Independent 3rd party verification agent will make a determination whether or not the event of default in the documentation associated with the Debt Instrument constitutes a Covered Default under the Reserve Agreement
    • If the independent 3rd party verification agent determines that a Covered Default has not occurred, Anzen will unlock funds within the staking pool and the process ends
    • If the independent 3rd party verification agent determines that a Covered Default has occurred, Anzen will release the coverage amount from the Anzen treasury and/or staking pools and unlock the remaining funds within the staking pool, and the process will continue
  6. 6.
    Approved Eligible Transaction investors will assign the covered amount of their investment in the Debt Instrument to Anzen per the Reserve Agreement
  7. 7.
    Anzen will exercise all rights and remedies as an investor in the Approved Eligible Transaction to capture all recovery amounts available from the Approved Eligible Transaction's distinct asset pool, credit enhancements or legal settlements
  8. 8.
    The process ends when all amounts have been recovered or a determination has been made by all counterparties to the Reserve Agreement that no further recoveries are possible
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