Please be aware that as the situation evolves, Eagle’s team of experts will continue to analyze the impact and update this procedure accordingly. This document primarily addresses the impact to accounting operations, specifically how users of Eagle Accounting should handle the various scenarios.

Pay special attention to underlined sections, as these highlight the most frequently encountered issues. Bold is used for navigation, modules, and screens. Italics are used for fields, tables, and errors. Fixed width indicates values for fields or code/text that should be entered. Tags are shown in parentheses (#) after field names.

What are the potential scenarios?

Please note that these are potential scenarios with suggested workflows only, which are based on Eagle’s specific processing. The intent of this document is not to suggest the appropriate handling of debt impacted by this situation as clients may have their own specific internal procedures.

Temporary Default - Maturing Debt

US Treasury Debt that matures during the default period: Funds holding US Government Debt that matures during the default period may want to prevent the maturity from processing and impacting available cash balances. Two possibilities that exist are a full default, where the US Government will not pay principal and interest and a technical default, where principal and interest payments are delayed. It is widely expected that a technical default is the more likely scenario.

Temporary Default - Non-Maturing Debt

Funds holding US Government Debt that does not mature during the default period may or may not decide to temporarily place debt into default and suspend daily accruals.

Ability to Trade Treasuries Post-Maturity

Funds may wish to retain the ability to trade defaulted treasuries post-maturity if there is a market for these.

Processing Steps

This is a high level flow. Please note that each individual firm may wish to treat the default processing differently.

Temporary Default - Maturing Debt

Option 1

Place security into default. Please note that this option will reverse period-to-date accruals.

1. Update security master
   1. Set Default Indicator (1551) to Yes (this will prevent maturity processing)
2. Add default periods
   1. Open Create Debt Default Period
   2. Add Periods Based On (1256): select whether you want to set up a default period for a specific position (Entity Name & Security), all positions of a bond (Security), or all positions of a group of bonds (Security Type)
      
      1. Add Periods for All Accounting Bases (1257): only required for Entity Name & Security
         1. Yes: Eagle Accounting automatically replicates the Debt Default Rule across each established accounting basis for the entity
         2. No: if an entity has multiple accounting basis, you must create a Debt Default Rule for each one
      2. If an Entity Name & Security rule and Security rule are both established, the former will take precedence
   3. Default Type (1551): select which earnings processes you with to suppress
   4. Default Start Date (220): enter the effective date to suppress earnings

Option 2

Do not place security into default. Allow coupon payment and maturity to occur and reverse out cash settlements.

1. Unsettle cash using Cancel Multiple Settlements
2. Change Manual Settlement Switch (2424) to Update to Manual to prevent contract cash from automatically resettling these transactions
3. Once securities actually pay, manually settle the coupons using Run Multiple Settlements

Temporary Default - Non-Maturing Debt

The same options listed above are available. If placing securities into default, period-to-date accruals and amortization will be reversed and will true-up when taking securities out of default.

If debt is not maturing (as with longer term US Government Debt), coupon payments can be reversed out and prevented from automatically settling using Option 2. Normal accruals will continue on a daily basis.

Ability to Trade Treasuries Post-Maturity

Some clients have expressed the need to trade securities that have matured, but have not paid, in order to have access to the cash. To do so, a dummy security master with a future maturity date must be created. After this has been set up, an exchange corporate action can be run to transfer holdings from Security A to Security B. Please note that a security cannot be traded on or after maturity date.

Next Steps

• Eagle will continue to closely monitor the situation and will update this document with any additional
• A best practice document further detailing steps and end-to-end impacts will be drafted and

For further questions or comments, please contact your Eagle Relationship Manager.