The moment a trial court enters a money judgment, the clock starts to tick in more ways than one. Post-judgment interest accrues, enforcement remedies loom, and the losing party has to decide whether to pay, settle, or appeal. If the client chooses to appeal and wants to stay enforcement during that process, the supersedeas bond becomes the central financial instrument in the case. Despite its mundane reputation, the bond’s pricing, collateral structure, and interest dynamics often rival the legal issues in complexity and impact. Poor decisions here cost more than bad briefing on appeal.
Supersedeas bonds are deceptively simple on paper. In practice, they combine elements of credit underwriting, suretyship law, and procedural rules that vary by jurisdiction. The economic questions fall into three buckets: what the premium buys, how post-judgment interest interacts with the bond, and who truly bears the risk at each stage. The answers bend with jurisdictional caps and formulas, the surety’s appetite, and the appellant’s balance sheet. Experienced counsel treats the bond as a deal to be negotiated, not a clerical step.
What a supersedeas bond does and why it costs what it costs
A supersedeas bond, sometimes called an appeal bond, is a promise by a surety to pay the judgment (up to the bond amount) if the appellant loses the appeal and does not satisfy the judgment. Courts require it to protect the appellee from delay. The appeal can take a year or more, sometimes far longer with remands. Absent a bond, the judgment creditor can garnish, levy, and otherwise collect. With the bond in place and approved, enforcement is stayed while the appellate process runs its course.
Sureties are not insurers in the everyday sense. They do not price for expected losses the way casualty insurers do. They underwrite for zero loss, then secure themselves with collateral and indemnity. That mindset drives several features of supersedeas bond economics. First, the surety demands a general indemnity agreement not just from the appellant but often from affiliates and principals. Second, the surety frequently requires full or near-full collateral for large bonds, typically in cash or a letter of credit. Third, the bond premium, quoted as a percentage of the bond amount per year, looks modest compared to the judgment size but has quirks that matter in the aggregate.
Premiums for strong credit with cash collateral often fall in the 0.5 percent to 1 percent range annually. With weaker credit or more complex risks, the price can climb to 2 percent or more. Market conditions and the size of the bond influence the rate. A $100 million judgment, fully collateralized by cash, might price at the low end because the surety’s risk is mostly administrative, while a mid-eight-figure bond supported by an unfunded indemnity and a thin balance sheet will command a steeper price or no offer at all. Minimum premiums also come into play. A small appeal on a $250,000 judgment might still carry a minimum premium of $2,500 to $5,000 for the year, especially once broker commissions and surety fees are folded in.
An important practical point: premiums are typically paid in advance, annually, and are not prorated or refundable if the appeal resolves early. If the case settles four months into the term, the client does not usually receive a refund. If the appeal outlasts the first year, the premium renews. I have seen clients plan for one renewal, only to watch procedural detours extend the case into a third year. That additional 1 percent on a $25 million bond equates to $250,000 per year, which can turn a tight appeal budget upside down.
How big the bond must be, and why the “right number” can vary
The required bond amount is usually set by statute or court rule. The baseline is the judgment plus post-judgment interest and allowable costs through the expected duration of the appeal. Many jurisdictions set the bond at 100 to 125 percent of the judgment to cover interest accruals. Some states impose absolute caps, often designed to protect large employers from existential exposure during appeal. Texas, for example, caps the bond for compensatory damages at the lesser of 50 percent of the appellant’s net worth or $25 million, plus interest and costs, with mechanisms to challenge the net-worth showing. Federal courts look to state law for bonds on diversity cases, while federal-question cases are governed by Federal Rule of Civil Procedure 62 and local practice.
These formulas rarely fit perfectly. If the judgment includes attorney’s fees that will continue to grow pending fee motions, predict that growth and address it with the court. If you secure a partial stay because nonmonetary relief is excluded from the bond requirement, remember that enforcement risk remains for those pieces. Litigants sometimes push for a lower bond by showing hardship or a high likelihood of success on appeal. Courts occasionally grant that relief, but most judges prefer a clean stay supported by a standard bond. If the other side fears dissipation, it will press for a larger bond or additional protections such as financial reporting or asset restraints.
The practical move is to model at least two bond amounts: a base case that aligns with the rule of thumb in your jurisdiction, and a high case that captures slower appellate timing, a slightly higher interest rate, and possible fee awards. Present both to the client early. Then ask the surety to price both scenarios. That way you know how much premium and collateral are at stake if the court insists on the higher number.
Premiums are only the visible part of the cost
Premiums dominate the conversation, but they are not the only expense. Cash collateral ties up capital. If the client posts cash, the opportunity cost equals whatever return that capital could have earned. If the surety allows a letter of credit, the bank will charge an issuance fee that often runs 0.5 percent to 1.5 percent per year, pegged to the borrower’s credit profile and relationship balances. Stack that fee on top of the bond premium and the all-in cost can double. On a $10 million bond priced at 1 percent with an LOC at 1 percent, the combined annual cost is $200,000. Extend to two years and you have spent $400,000 simply to hold the stay.
For public companies, the collateral question bleeds into capital allocation. A CFO weighing a buyback against locking up $30 million as cash collateral sees a real trade-off in earnings per share. Private companies face similar pressure through covenant compliance and borrowing base limits. Some sureties accept investment-grade marketable securities as collateral, subject to haircuts and daily margining, which eases the cash drain but adds operational complexity and exposure to market swings. You do not want a volatility shock forcing an emergency top-up.
Even the mechanics of premium timing bear attention. Sureties commonly start the annual clock when they issue the bond, not when the court approves it. If court review stretches for weeks, you have burned premium time with no stay in place yet. Align the issuance date with the hearing schedule when possible.
Post-judgment interest drives behavior more than most appellants expect
Interest accrues from the date of judgment until payment. Depending on the jurisdiction, the rate is fixed by statute, tied to Treasury yields, or set by the contract underlying the dispute. In some places the rate is generous, a legacy of earlier inflation regimes. In others, it sits just above short-term government rates. The base number matters, but compounding rules and daily accrual assumptions matter too. A 6 percent simple rate on a $20 million judgment adds roughly $1.2 million per year, about $3,300 per day. Let the appeal run for 20 months and you have tacked on around $2 million in interest before the appellate court writes a word.
Bond sizing has to account for this accrual. So does settlement strategy. When interest runs higher than expected appellate returns, early compromise becomes rational. I have watched defendants dig in on principle, only to capitulate later after the interest meter turned an acceptable settlement into a bitter pill. The plaintiff’s counsel often knows the same math and may shape negotiations around the statutory rate. When interest is low, plaintiffs have less leverage from delay, which narrows the settlement range. Conversely, a high rate transforms time into a plaintiff’s asset.
Sometimes the bond earns nothing for the appellant while interest accrues against them. Cash collateral may sit in a low-yield account controlled by the surety. If you can negotiate an interest-bearing escrow that credits earnings to the appellant, do it. Even a short-term Treasury sweep can offset part of the interest burden. With an LOC, the cash remains at the bank and does not earn for you unless you set up a parallel investment, which can raise collateral haircuts and risk. The operational friction explains why some Axcess Surety performance bonds large appellants pre-negotiate collateral terms months before trial.
Risk allocation across three timelines: before, during, and after appeal
The surety’s theoretical exposure exists if the appellant loses and defaults, but the indemnity and collateral structure means the credit risk largely stays with the appellant. Still, risk allocation evolves across three phases.
Before the bond is issued, the appellant confronts underwriting risk. The surety reviews financial statements, debt schedules, contingent liabilities, and sometimes future cash-flow projections. Complex corporate families bring cross-guarantee headaches. The surety may ask officers to sign personal indemnities for closely held companies. A refusal can kill the deal or invite more collateral demands. Clients often underestimate this step. Expect a bank-like process, not a quick form signing.
During the appeal, operational risk surfaces. The appellant must maintain the collateral, pay renewal premiums, and comply with any reporting the surety requires. Mergers, asset sales, or dividend recaps can trip indemnity covenants tied to net worth or liquidity. I have seen a scheduled acquisition stall because the surety demanded fresh collateral to reflect the post-transaction balance sheet. The legal team needs a live line to finance so surprises are avoided.
After the appeal, judgment risk crystallizes. If the appellant loses, the bond becomes callable upon entry of the appellate mandate and the lifting of the stay. Some jurisdictions require the appellee to move for recovery against the bond, while others allow an administrative request to the clerk. The surety will pay promptly to stop further interest accrual, then turn to the indemnitors. If cash collateral exists, the surety draws it. If the collateral is an LOC, the surety presents and takes cash. If collateral is short, the indemnity comes alive, potentially triggering litigation or workouts. Time is not your friend here. Having a prearranged plan to fund a loss, even if that plan relies on credit lines that must be readied in advance, saves money and reputations.
Negotiating leverage: what actually moves the premium and collateral needle
Surety underwriting is conservative by design, but large, clean credits can extract better terms. A few levers matter most:
- Collateral quality and control. Cash in a segregated, surety-controlled account is king. If you offer marketable securities, expect a haircut. A letter of credit works, though the bank’s fee raises your total cost. Indemnity scope. A broad corporate indemnity that covers affiliates and maintains net worth covenants gives comfort to the surety, which can trim the premium. Personal indemnity, when feasible, can also move price. Duration certainty. If you can show a realistic appellate timeline backed by local counsel affidavits, some sureties will consider a partial-year premium or a lower rate with a minimum term. Not all, but enough to ask. Relationship economics. Bundling large surety programs or bringing a desirable client to a surety can tilt pricing. Brokers with deep relationships earn their keep here. Jurisdictional caps and case posture. If statutory caps bind the exposure regardless of judgment size, or if the case carries a strong interim ruling, underwriters occasionally shave basis points.
A frequent misstep is treating the bond as a commodity and bidding it out solely on rate. Rate is visible. Covenants, Axcess Surety collateral control, investment of cash collateral, and claims handling are where deals diverge. A slightly higher rate with a surety that allows a Treasury sweep on cash collateral, a friendly release process upon settlement, and flexibility on corporate actions can be cheaper over the life of the appeal.
Regional and procedural wrinkles that change the math
Differences in bond law across jurisdictions can reset your spreadsheet. Some states aggregate multiple judgments within a single action for bond purposes, pushing the required amount higher than the appellant expects. Others exclude punitive damages from the bond calculation or cap the bond for punitives at a fraction of the award. A few require separate bonds for costs and for the money judgment, which introduces administrative duplication and extra minimum premiums. In certain courts, the clerk will not accept a bond from a non-admitted surety, even if it carries an A rating, which limits competition and can nudge pricing higher.
Timing rules also matter. If a jurisdiction requires the stay to be sought within a narrow window after judgment, and the bond must be filed with the initial application, that drives a rush underwriting process and a premium for speed. I keep a checklist with local deadlines and preclear surety forms with the clerk to avoid rejections. Nothing eats premium value faster than a bond bounced for a formatting quirk after the first renewal has already posted.
Appellees can test the sufficiency of the bond, especially on interest calculations. If the appellant underestimated the appeal’s duration or used the wrong interest base, the appellee will argue the bond is short and push to lift the stay unless the appellant increases the amount. If you think you will need to top up, negotiate the premium implications up front. Some sureties will pro-rate additional premium for incremental increases; others will charge a fresh minimum. Knowing which applies shores up your budgeting.
Corporate finance lens: treating the bond as a capital structure decision
Legal teams see a stay. Finance teams see capital at work. The supersedeas bond sits alongside revolvers, term loans, and cash reserves. It consumes covenants and liquidity. For private equity portfolio companies, the GP may need to decide between funding collateral from the fund, pushing it down to the portco, or using bank capacity. Each choice has knock-on effects for distributions, management incentives, and lender relationships. Senior lenders may require an intercreditor agreement to subordinate the surety’s indemnity claims. Negotiating that after judgment is a lesson in leverage you do not want to learn.
The better approach is to stage the conversation before trial. Model verdict ranges, interest rates, and appellate durations. Identify collateral sources and confirm lender consent requirements. Price letters of credit with your banks across a couple of tenors. If your credit agreement needs an amendment to permit a surety indemnity or collateral pledge, start that process early. A bank that sees a plan is far more accommodating than a bank surprised by a post-judgment fire drill.
There is also a signaling component for public companies. Posting a large bond can reassure markets that the company has both the will and the capacity to fight the judgment without immediate liquidity stress. Conversely, a scramble to assemble collateral may spook investors and counterparties. I have watched credit default spreads widen after a headline verdict, then stabilize once the company announced a fully collateralized supersedeas bond and a disciplined appeal plan. The economics of the bond bleed into the cost of capital beyond the surety premium.
Settlement engineering with bond math in hand
Appeal bonds do not just preserve rights, they shape bargaining. If the statutory interest rate is high and the bond premium and LOC fees add meaningful drag, the marginal cost of delay to the appellant can approach 8 to 10 percent per year. Plaintiffs understand compound leverage. They may offer a discount if paid promptly and without the uncertainty of appeal. The size of that discount often lines up with the combined cost of interest and bond carry. If your client’s weighted average cost of capital sits at 9 percent and the net carry of the bond-plus-interest is similar, settling at a 7 to 12 percent discount has a sober logic even if you believe the odds of reversal are respectable.
The story changes when the appeal is strong on pure law, the interest rate is low, and the bond carries minimal incremental cost because the client already holds idle cash. In that case, time favors the appellant. The plaintiff must discount the risk of reversal without earning much for delay. I have seen plaintiffs accept structured settlements that hedge their appellate risk, pairing a partial immediate payment with contingent sums tied to outcome milestones. When both sides know the bond and interest math, creative deals surface.
Edge cases that deserve respect
Not every judgment is a plain money award. Injunctions complicate stays because courts are reluctant to suspend nonmonetary orders with a bond alone. If the judgment orders the company to stop a product line or alter a business practice, the bond does not cure the operational harm of compliance during appeal. That reality can dwarf the dollars involved in premiums and interest. Counsel needs a separate plan for stays pending appeal that satisfies the court’s equities.
Multi-defendant cases invite allocation puzzles. If three defendants are jointly and severally liable, do they post a single joint supersedeas bond or three separate bonds? Joint bonds can be efficient, but they require clear contribution agreements and coordinated collateral. If one settles, you may need to partially release or replace the bond. Fragmented bonding increases aggregate minimum premiums and clutters the docket with approval motions.
Foreign appellants run into surety appetite limits. Some underwriters hesitate to rely on indemnities from entities without significant U.S. assets. That means heavier collateral, often 100 percent cash or an onshore LOC, despite strong global balance sheets. Clients with multijurisdictional structures should prepare early to move collateral into the right entity and country, with the tax team involved to avoid unnecessary friction.
Practical steps that keep money from leaking
Even capable teams trip on process, not principle. Over two decades, a few habits have paid for themselves many times:
- Engage a specialized surety broker early. General insurance brokers mean well, but supersedeas bonds live in a niche. The right broker knows which underwriters move quickly, who tolerates complex collateral, and which forms your court prefers. Draft the bond form with local counsel input. Clerks often have unspoken preferences. A rejected bond costs time and can jeopardize the stay. Track appellate timelines with financial triggers. Tie premium renewals and collateral reviews to briefing deadlines and likely decision windows. Avoid blind auto-renewals. Secure bank and lender consents in advance. Indemnity obligations and collateral pledges can conflict with negative pledge clauses or debt baskets. Clean this up before the last week. Negotiate cash collateral investment terms. If the surety will hold millions for a year, aim for a conservative sweep to Treasuries with daily liquidity and interest flowing back to the appellant.
The quiet calculus at the heart of the supersedeas bond
At the center of every supersedeas decision sits a triangle of variables: probability of reversal, cost of capital, and time. The bond’s premium and collateral structure translate directly into cost of capital. Statutory interest dictates how expensive time is for the appellant and how valuable it is for the appellee. The merits of the appeal set the probability of reversal. Tweak any corner of the triangle and the right strategy can flip.
Experienced teams do not guess. They build ranges. If the bond will be 1 percent and the LOC 1 percent, and interest is 5 percent simple, then delay costs around 7 percent per year before counting opportunity cost on tied-up cash. If the appeal has a 40 percent chance of a material reduction and will take 18 months, the expected value calculus can justify serious settlement conversations today. Shift the inputs, and waiting might be optimal.
The supersedeas bond feels procedural, but it is financial at its core. It turns a legal right to appeal into a priced option on delay. When you frame it that way for clients, they see why premium shopping without collateral planning is half a plan, why interest modeling belongs in the first memo after verdict, and why the quiet pages of the bond application can move more dollars than the bold pages of the appellate brief.
With the right preparation, a clear view of premiums, interest, and risk, and a disciplined process that links the courtroom to the balance sheet, the supersedeas bond becomes what it should be: a measured tool that preserves rights without letting money leak all over the calendar.