Template:Record amount paid amount ex amount: Difference between revisions

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Revision as of 17:09, 12 November 2019

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→‎Dividend clawback: if the {{eqderivprov|Issuer}} doesn’t actually pay a declared dividend

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 ===[[Dividend clawback]]: if the {{eqderivprov|Issuer}} doesn’t actually pay a declared dividend===
-Nor does the [[User’s Guide to the 2002 ISDA Equity Derivatives Definitions]]. It suggests, without saying in which cases, that you might need a [[clawback]] right if you don’t want to be on the hook for a {{eqderivprov|Dividend Amount}} declared but not eventually paid by the {{eqderivprov|Issuer}}<ref>This is a JC bastardisation of typically grim ISDA textical contortion, needless to say.</ref>:
+Nor does the [[User’s Guide to the 2002 ISDA Equity Derivatives Definitions]]. It suggests, without saying in which cases, that you might need a clawback right if you don’t want to be on the hook for a {{eqderivprov|Dividend Amount}} declared but not eventually paid by the {{eqderivprov|Issuer}}<ref>This is a JC bastardisation of typically grim ISDA textical contortion, needless to say.</ref>:
 :'''''{{eqderivprov|Dividend Recovery}}''': If the amount an {{eqderivprov|Issuer}} actually pays to {{eqderivprov|Share}}holders of record in respect of a {{eqderivprov|gross cash dividend}} is less than the amount declared (a “'''{{eqderivprov|Dividend Mismatch}}'''”) the {{isdaprov|Calculation Agent}} may calculate a payment under the {{isdaprov|Transaction}} to account for {{eqderivprov|Dividend Mismatch}} and compensate for interest incurred by the party that made the relevant payments. Where the amount actually paid by the {{eqderivprov|Issuer}} to {{eqderivprov|Share}}holders of record for any such dividend is paid or (scheduled) after the {{eqderivprov|Termination Date}}, this provision will still apply even though relevant settlement date has passed. If the {{eqderivprov|Issuer}} subsequently corrects the under-payment, the {{isdaprov|Calculation Agent}} may make a further adjustment.''
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 “Parties should consider,” further ruminates the [[User’s Guide to the 2002 ISDA Equity Derivatives Definitions|User’s Guide]], in typically passive-aggressive fashion, “the potential [[credit risk]] created by this provision and may wish to consider whether such amounts are adequately covered under the definition of “{{csaprov|Exposure}}” under any relevant [[credit support document]].”
-But consider this: in what universe would the writer of a [[derivative]] referencing an {{isdaprov|Share}}, want to be liable for a [[dividend]] ''declared'' but not ultimately ''paid'' by the {{eqderivprov|Issuer}}? That would be to do something [[equity derivative]]s are expressly designed not to do.
+But on what planet would an {{eqderivprov|Equity Amount Payer}} want to be liable for a [[dividend]] ''declared'' but not ultimately ''paid'' by the {{eqderivprov|Issuer}}? And ''why''?That would be to do something [[equity derivative]]s are expressly designed not to do.
 ===House view: S.N.A.F.U.===
 The [[JC]] concludes this is simply a howler in the {{eqdefs}} which ISDA hastily tried to cover up with that clawback malarkey. In any case, to be safe, reference the {{eqderivprov|Paid Amount}}. Consensus amongst market professionals we have consulted is that {{eqderivprov|Paid Amount}} does, as its drafting suggests, depend on the {{eqderivprov|Issuer}} ponying up. That is where you want to be. <br>