> In practice though they just use new debt from new investors to payoff the old one to old investors.
One particularly interesting idea I've heard bandied about is to eliminate the rollover risk this represents by allowing the issue of perpetuities. Obviously repayment risk remains, as Evergrande currently reminds us.
So the issuer just pays interest forever until it happens to be paid off?
Similar to how a credit card is paid off? Or line of credit? That’s kind of interesting, crowd invested credit lines. Doable now, only by investing in a lending corporation, but not on the open market.
CREAM Finance’s Ironbank in the defi/open finance space is attempting something like that, where protocols get a credit limit and can borrow to finance their operations. Interest payments shared with investors.
> So the issuer just pays interest forever until it happens to be paid off?
Well, by definition perpetuities are never paid off. You could just buy your debt back on the open market though. I'm not a lawyer, so IDK if there's any interactions with "Dead hand" rules in the area based on a brief review of wikipedia[1], similar to 99 year leases or whatever motivated this potential disaster[2].
One particularly interesting idea I've heard bandied about is to eliminate the rollover risk this represents by allowing the issue of perpetuities. Obviously repayment risk remains, as Evergrande currently reminds us.