The promote accrues on interest they haven't collected yet

Deep in a debt fund LPA and two clauses are sitting next to each other in a way I don't love.

First one is in the servicing standard. The manager may grant up to two extensions of a loan's maturity at its own discretion, and an extension granted under that provision is expressly excluded from the definition of "Modified Loan" for reporting purposes. So the quarterly report's modification percentage and the default rate both exclude anything that's been extended twice. Every number an LP looks at to judge credit quality skips that bucket.

Second one is in the waterfall. Incentive allocation is calculated on net investment income, and net investment income is defined by reference to income recognized under the fund's accounting policy. That policy accrues interest on non-cash-pay loans until the manager determines collection is not reasonably assured. The manager makes that determination.

So the manager can extend a loan twice without it showing up as modified, keep accruing interest it isn't receiving, and take a promote on the accrual. There's a clawback, but it's measured at the end of the fund's life and this is an open-end vehicle with no stated end.

I'm not saying they're doing any of this. The book is 71 loans and cash collections have tracked accrued income within a couple percent for eight quarters, which is the actual comfort. But the document permits a gap I can't see from the outside.

What I'm working out is what to ask for that would close it without asking them to amend an LPA for one LP. Something reportable, ongoing, and specific enough that they either provide it or tell me no.