Liquidation/Application of Posted Credit Support (VM) - NY VM CSA Provision: Difference between revisions

Liquidation/Application of Posted Credit Support (VM) - NY VM CSA Provision (view source)

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 {{nycsaanatn|10(c)|}}
+Note the references here are to the Expenses section (section 11) in the {{isdama}} and not the Expenses ''paragpraph'' (Paragraph 10) in the  {{nyvmcsa}}. Alles klaar, as usual. And “{{isdaprov|Defaulting Party}}” is term from the {{isdama}}, not the {{nyvmcsa}} — it means the person who has committed a Section {{isdaprov|5(a)}} {{isdaprov|Event of Default}} — and is to be contrasted with an “{{isdaprov|Affected Party}}”, being a person who has is subject to a Section {{isdaprov|5(b)}} {{isdaprov|Termination Event}}.
+{{isdaprov|Termination Event}}s are, in the main, less odious than {{isdaprov|Events of Default}}, inviting less of the opprobrium on the head of those who suffer them than Failures to Pay and Bankruptcies. And they are less likely to lead directly and immediately to the total implosion of the {{isdaprov|Affected Party}}.
+So the interesting question, posed not entirely rhetorically for {{icds}}, is precisely ''when'' in the absence of an {{isdaprov|Event of Default}} and thus a {{isdaprov|Defaulting Party}}, one would be [[Enforcement event|enforcing]] on, and therefore liquidating and applying, {{nyvmcsaprov|Posted Credit Support}}. Not often. You don’t generally enforce security against a solvent counterparty who can just pay you back.
+There is one case: the {{isdaprov|Additional Termination Event}}, which is a customised {{isdaprov|Termination Event}} added in by the parties. These things — examples are [[NAV triggers]] and [[Key person event]]s — tend to be directly credit-related and apocalyptic in nature than the preprinted {{isdaprov|Termination Event}}s and thus have more of the characteristics of {{isdaprov|Events of Default}}.  They are the one time you might be enforcing on pledged collateral (but even in this case it would be unlikely unless the ATE quickly descended into a full-blown Event of Default — which if you were closing out, it could quite likely do — in which case the trick would be to characterise your close out as being predicated on the later Event of Default.
+So, in any case if you close out on an [[ATE]], you have to share the enforcement costs, but if it is a full blown {{isdaprov|Event of Default}}, you can peg them all on the Defaulting Party.
+An odd and probably unintended complexity, it seems to this observer.