At maturity, strategy vaults need to convert assets back to cash in order to pay off any outstanding debts that have not been exited or rolled forward. This process is called settlement. Each vault will implement custom settlement logic that dictates how assets are converted back to cash and at what time the settlement period begins relative to maturity.
As an example, consider a levered vault that implements a Balancer boosted stablecoin LP strategy using USDC as the primary borrow currency.
Total vault shares: 500,000 (USDC value: 500,000)
Total debt: 400,000 USDC
Settlement period start: 2 days prior to maturity
This vault has 400,000 USDC in total debt that it needs to pay back to Notional. Once the settlement period begins 2 days prior to maturity, this vault will initiate the process of converting its assets to the USDC that it needs to pay back its debts.
In practice, this vault will be unstaking its BPTs, withdrawing its liquidity from Balancer, and converting the different stablecoins it receives into USDC. This vault might utilize a 2 day settlement period to allow the vault to settle its assets in pieces so that it can avoid unnecessary transaction costs associated with converting all its assets back to USDC in a single transaction. Once the cash has been raised, the vault will deposit that cash onto Notional and clear its debt.
During the settlement period, users will be unable to enter or exit the vault. After settlement has concluded, users will be able to withdraw their share of the remaining assets in the vault or re-lever themselves using a future maturity.