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Definition of 'Obligor'

An obligor is a person or company that is legally obligated to pay a debt. The obligor is the party that owes the money, and the obligee is the party to whom the money is owed. In a loan agreement, the obligor is the borrower, and the obligee is the lender.

In a bond agreement, the obligor is the issuer of the bond, and the obligee is the bondholder. The obligor is responsible for making the interest payments on the bond and repaying the principal at maturity.

If the obligor fails to make a payment, the obligee may have the right to take legal action to collect the debt. The obligee may also be able to sell the bond to another investor, who will then become the new obligee.

The obligor's creditworthiness is an important factor in determining the interest rate on a loan or bond. A lender or investor will charge a higher interest rate to an obligor with a poor credit history.

The obligor's financial situation can also affect the value of a bond. If the obligor's financial condition deteriorates, the value of the bond may decline. This is because investors will be less willing to buy a bond from an obligor that is at risk of default.

In some cases, an obligor may be released from their obligation to pay a debt. This can happen if the obligor is declared bankrupt, or if the debt is discharged in a bankruptcy proceeding.

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