Based on the definition : “A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.”, It seems that only the non-payment of interest and principal on a debt could trigger a loss and then a reimbursement under a financial guarantee.
But in certain paper, the description of financial guarantee becomes “…financial guarantee contract must be directly exposed to the risk being guaranteed (that is, the holder must hold the guaranteed asset, liability, or equity and be subject to a loss).” which removes the direct link to “non-payment”.
I would like to have your view or I would appreciate if you can direct me to recent literature that could clarify the following case : If there is an actual loss due to a direct exposure but without a “failure to pay” on the original debt instrument. Typically a restructuring of a company, where the debt has always paid interest but the debtholder will have to take a loss due to the company restructuring.
Thank you in advance for your guidance on the subject.