A delayed security is one whose cash or stock does not arrive on the published pay or effective date: a late dividend, a coupon the paying agent has not yet funded, new shares that sit in a pending allotment. Entitlement is unchanged; only the value date slips.
A defaulting security has missed a payment it was contractually due to make. Coupons stop, dividends are passed, or principal is not repaid. The holding remains on the books until it is exchanged, written down, or cancelled in a restructuring.
Sovereign restructurings are the large-scale version. Greece’s 2012 private-sector exchange took roughly €100 billion out of about €350 billion of Greek government debt, replacing old bonds with a package of new ones at a deep haircut.
Atlantic Horizon UCITS ICAV sees the delayed case on Thames Industrial plc when a 12p interim does not hit CREST on pay date, and the defaulting case if a Nippon Industrials KK yen bond in the Cayman sleeve misses a coupon. State Street will age the credit. Dublin still has to know which of those two stories it is telling in NAV. A delay is a receivable. A default is a credit event. They are not interchangeable flags.
Paying unitholders as if Thames Industrial’s 12p had arrived funds them from the house. Writing Nippon Industrials to zero because a coupon is three days late is an invented write-down. The Irish administrator cannot outsource that distinction: final NAV stays in Dublin, and the ICAV’s shareholder register stays in Dublin, even when the cash is stuck at a paying agent in London or Tokyo.
Loans and manufactured income have to follow the same split. A delayed Thames Industrial dividend is still owed by the borrower. A defaulted Nippon Industrials coupon is not something the borrower can manufacture out of thin air. Freeze the second; age the first. Do not freeze both because the nostro is unchanged this morning.
Until exchange terms are final, do not invent a write-down in the settlement ledger. Mark the price, flag the line, keep the ISIN alive. The Greece 2012 lesson for a desk is scale and default: the “voluntary” exchange was the path, not “keep the old bond”.