Impairment Waterfall

Waterfall Mechanics

When a host defaults on PPA payments, the impairment follows a strict order.

The Protocol maintains a reserve fund, funded by protocol fees. Protocol fees will initially be utilized to continuosly scale the reserve fund buffer.

If defaults exceeds the entire buffer, only then will the sGRID begin to experience impairment. The carrying value of the impaired asset will be written down to zero, potentially reducing the next calculated NAV price.

This creates a reduced redemption rate for sGRID tokens, distributing the impairment proportionally across all sGRID holders.

Recovery Process

In certain cases, the independent managers of the SPVs may pursue partial recovery.

Recovery proceeds are directed back to the vault as the holder of the Deed Poll for the impaired asset, treated as one-time revenue for the NAV calculation. The Deed Poll carrying value remains written down to zero.

This waterfall approach ensures that higher-priority capital providers receive recovery proceeds first, reinforcing the protocol's commitment to protecting senior capital.