Recycling Period

The defined period in a revolving structured legal-asset facility during which proceeds from resolved cases may be reinvested into new eligible claims rather than distributed to investors, after which the facility typically converts to an amortization phase in which all proceeds are applied to paying down outstanding notes or interests. The length of the recycling period is negotiated based on the sponsor's expected deployment pace and the investor's desired overall facility duration, and recycling is usually subject to the same eligibility criteria and concentration limits that govern the initial pool, ensuring reinvested capital maintains the portfolio's original risk profile rather than drifting toward lower-quality assets over time. Facilities commonly include an early transition to amortization — ending the recycling period ahead of schedule — if portfolio performance tests are breached, giving investors a mechanism to stop reinvestment and begin recovering capital if the underlying assets are underperforming.

The recycling period is where a sponsor's ongoing underwriting discipline matters most to an investor, since capital is being redeployed into assets the investor has not individually reviewed, relying instead on the eligibility criteria and performance triggers negotiated at closing to constrain how that discretion is used. Investors negotiating recycling-period length trade off facility duration against exposure to the sponsor's future underwriting decisions, generally preferring a shorter recycling period with an experienced sponsor and a longer one only where sponsor track record and reporting transparency are already well established.