What is the term for relieving a bond issuer's obligation to pay back bondholders?

The term for relieving a bond issuer's obligation to pay back bondholders is called defeasance. This process involves the issuer setting aside sufficient funds in a special escrow account to pay off the bonds at their maturity or to cover the remaining payment obligations. By doing so, the issuer effectively removes the liability from their balance sheet as those funds are explicitly earmarked for the repayment of the debt.

Defeasance is often employed in real estate financing or municipal bonds, where the issuer can enhance their financial position and credit profile by ensuring the secured funds are available for bond repayment, thus eliminating the risk to bondholders. It can also provide benefits in terms of potentially lowering interest rates or achieving other strategic financial goals without requiring a direct payoff of the bonds.

The other terms are related to bond management but serve different purposes: refinancing refers to replacing existing debt with new debt, typically to benefit from lower rates; redemption signifies the actual process of repaying the bond prior to its maturity; and restructuring indicates a broader approach to modifying the terms of debt agreements, which may not equate to relieving the obligation.