Events of Default (Early Termination Payments) - ISDA Provision: Difference between revisions

Events of Default (Early Termination Payments) - ISDA Provision (view source)

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 {{isdaanat|6(e)(i)}}
-The effect of this is that in closing out an ISDA, the first step is to terminate all {{isdaprov|transaction}}s, then figure out any {{isdaprov|Unpaid Amount}}s that were due but had not been paid at the time the {{isdaprov|Transaction}} terminated. The close out happens  under Section {{isdaprov|6(e)}} of the {{isdama}} itself and the recourse is to a net sum. Betting does ''not'' happen under the {{isdaprov|Transactions}} — on the theory of the game there are no outstanding Transactions at the point of netting; just payables.
+The effect of this is that in closing out an ISDA, the first step is to terminate all {{isdaprov|transaction}}s to arrive at a {{isdaprov|Close-out Amount}} for each one, then figure out if there were any {{isdaprov|Unpaid Amount}}s that were due under {{isdaprov|Transaction}}s but had not been paid at the time the {{isdaprov|Transaction}}s terminated. The close out happens under Section {{isdaprov|6(e)}} of the {{isdama}} itself and the recourse is to a net sum. Netting does ''not'' happen under the {{isdaprov|Transactions}} — on the theory of the game there are no outstanding Transactions at the point of netting; just payables.
 Therefore, if your [[credit support]] (particularly [[guarantee]]s or [[LC|letters of credit]]) explicitly reference amounts due under specific {{isdaprov|Transaction}}s, you may lose any credit support at precisely the point you need it.