When issued, the blockchain calculates how much HIVE has to be taken out of collateral in order to produce HBD that was already given to the user, using the median of median hourly HIVE prices from the last 3.5 days corrected by the 5% fee.
The price might be smaller than the "official" price in case the main price was artificially corrected upward when the hard limit condition was hit in the meantime.
If collateral exceeded the amount needed for HBD production, the extra is returned to the user balance and the rest is burned.
If during 3.5 days of wait the market price fell more than twice from the previous minimum, all collateral is burned, nothing is returned to the user and the associated loss is absorbed by the network in form of higher than the proper supply of HIVE. In such a case, a system_warning_operation virtual operation is produced.