Settlement Vault: Overview

The AgamaSettlementVault is the Agama-specific primitive that bridges seized RWA collateral back into USDr. It exists because Rayls has no DEX for AmFi tokens, so we cannot liquidate through an on-chain swap.

Problem

After SP.liquidateBorrower(), the Stability Pool holds AmFi senior tranche tokens. Without an on-chain market:

• Stability Pool depositors cannot simply be repaid in USDr.
• The only legitimate path from RWA to USDr is issuer redemption, which is off-chain and takes D+15 (AmFi) or longer depending on the issuer.
• Distributing RWA tokens in-kind to retail Stability Pool depositors is unattractive: most cannot hold or redeem them with the issuer directly.

Solution: auto-reconstituting Stability Pool

The Settlement Vault:

1. Takes custody of the seized RWA via handleSeizure and queues the batch for off-chain redemption.
2. The manager redeems the batch with the issuer (~15-day off-chain process).
3. On settleRedemption, applies a configurable LiquidationSplit (treasuryBps + redeemBps) to the USDr proceeds (not to the RWA): the Treasury slice is forwarded to Treasury.deposit(USDr, …) and the redeem slice is re-deposited into the Lending Pool on the Stability Pool's behalf, restoring the Stability Pool's agYLD position and lifting sagYLD's share price pro-rata across all holders.
4. Maintains an escape hatch (emergencyDistributeInKind) if the manager is inactive beyond staleBatchPeriod (60 days).

Key simplification

Rather than distributing USDr per depositor via individual claims (which would require per-deposit balance snapshots), the Settlement Vault funnels recovered USDr back into the Lending Pool, minting fresh agYLD to the Stability Pool. Every sagYLD holder benefits proportionally through the rising share price: no individual claim mechanism needed. The same depositOnBehalf rail also distributes the liquidation premium: both the peg-gap repayment and any surplus land in the SP, the share price lifts, and all holders earn pro-rata to their stake.

The Reserve Fund participates in the Stability Pool as a staker like any other, earning pro-rata yields on the capital it has deposited there. There is no privileged slice routed to it from the surplus.

This simplification drops an entire ClaimSettlement contract from V1 scope.

Flow

The split is applied to USDr at settlement, not to RWA at seizure. handleSeizure queues the entire seized batch unchanged; settleRedemption decides how to split the USDr proceeds.

LiquidationProxy.liquidate()
  │
  ├─ LendingPool.liquidate (collateral → SP, scoped debt burned, agYLD whole)
  │
  └─ SP transfers seized RWA → SettlementVault.handleSeizure(adapter, data, seized, debt)
       │
       ├─ records Batch { id, asset, rwaAmount = seized, pegGap = debt, queuedAt }
       │     (no split here — the entire seized batch sits in the vault)
       │
       └─ emits BatchQueued(id, asset, rwaAmount, queuedAt, pegGap)
 
(off-chain, ~15 days)
 
Manager redeems the batch with the issuer → receives USDr
Manager → SettlementVault.settleRedemption(batchId, usdrReceived)
  │
  ├─ apply LiquidationSplit on the USDr proceeds:
  │     toTreasury = usdrReceived × treasuryBps / 10000   → Treasury.deposit(USDr, toTreasury)
  │     toSP       = usdrReceived − toTreasury            → LendingPool.depositOnBehalf(SP, toSP)
  │                                                          → fresh agYLD minted to the SP
  │                                                          → sagYLD share price lifts pro-rata
  │
  ├─ shortfall = max(0, batch.pegGap − usdrReceived)
  │     if shortfall > 0: bad debt is socialised via LP.redistributeBadDebt
  │                       (Liquity O(1) across active borrowers; the RF takes the
  │                        largest share of any SP dilution before that path because
  │                        it's the largest single SP staker)
  │
  ├─ leftover RWA in the vault is swept to address(0xdead)
  │     (the on-chain RWA position is closed, the issuer holds the off-chain asset)
  │
  └─ batch.status = Settled

LiquidationSplit calibration

The struct has two fields in V1 — by design. There is no separate reserveFundBps slice (RF earns through its SP stake) and no inKindBps slice (in-kind exit is handled by the emergency escape hatch, not the normal path).

struct LiquidationSplit {
    uint16 treasuryBps;
    uint16 redeemBps;   // must satisfy treasuryBps + redeemBps == 10_000, redeemBps ≥ 5_000
}

Numbers should be re-calibrated after the first 10 mainnet liquidations, based on realised redemption fees and timing.

Escape hatch

If Manager doesn't settle within staleBatchPeriod (60 days):

function emergencyDistributeInKind(uint256 batchId) external {
    Batch storage b = batches[batchId];
    require(block.timestamp > b.queuedAt + staleBatchPeriod, "NotStale");
    require(b.status == Status.Queued, "AlreadySettled");
 
    // Distribute pro-rata to sagYLD holders at batch.snapshotBlock
    // via sagYLD's ERC20Votes-based getPastVotes mechanism.
    b.status = Status.EmergencyDistributed;
    ...
}

Governance is actively trying to avoid triggering this path: it leaves retail Stability Pool depositors holding RWA tokens they may not be able to redeem themselves. It exists to prevent total manager capture, not as a normal exit.

Continue to Functions for the complete interface.