For which type of debt is the concept of legal defeasance applied?

The concept of legal defeasance applies to both private and public sector debt, making the selection of all-encompassing debt types the correct choice. Legal defeasance refers to a financial arrangement where a borrower sets aside funds, often by purchasing government securities, to cover future debt service obligations. This process effectively removes the liability from the borrower's balance sheet, allowing them to demonstrate that they have sufficient resources to meet their future obligations without the risk of default.

In both private and public sector financing, defeasance serves as a strategic financial tool to manage debt, improve creditworthiness, and potentially achieve better financial terms. This practice can be utilized in municipal bonds, corporate bonds, or other types of financing, illustrating its broad applicability across different sectors.

The other options do not adequately encompass the universal nature of legal defeasance as it is relevant to various types of debt across sectors, which is why they do not represent the complete scope of the concept.