A bond which is often issued by a low-rated debtor country to a creditor bank in lieu of bank credit to the effect that the creditor bank is allowed to be exempted from future requests for new funds and restructuring. Typically, exit bonds have long-term maturities and carry low interest rates.
Effectively, an exit bond places a limit on the future nominal claims of the creditors on a specific country without affecting the availability of funds at hand. Therefore, the debtor country is not poised to lose. However, the creditors will collectively lose unless overall gains are unlocked due to the reduction in the debt outstanding.
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