Eligible Collateral

Eligible collateral, in a legal receivables borrowing base, is the subset of the underlying pool that satisfies a set of exclusion criteria built specifically for how this asset class can be weaker than it looks, rather than the criteria conventional trade receivables lending applies. Matters past a defined procedural age without material movement, matters concentrated past a threshold in a single defendant, judge, or legal theory, and matters whose underlying claim is independently disputed on grounds unrelated to value should be excluded or haircut more aggressively than the standard pool, the legal-asset equivalent of excluding past-due or disputed invoices from a conventional borrowing base. Defining eligibility criteria properly requires understanding this asset class's specific failure modes, since a criteria set copied directly from a conventional receivables facility will miss the axes, procedural stagnation, legal-specific concentration, independent dispute, that actually determine whether a given legal receivable is genuinely sound collateral or only appears so at a glance, and a facility built on those borrowed criteria alone will underprice exactly the risk this asset class is most prone to, discovering the gap only once a concentrated loss has already occurred and the institution's own eligibility criteria have already failed to catch it.