Template:M summ Pledge GMSLA 10: Difference between revisions

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+[[10 - Pledge GMSLA Provision|To]] be read with the commentary paragraph {{pgmslaprov|11}} ({{pgmslaprov|Consequences of an Event of Default}}) and verily the accompanying {{pgmslaprov|Security Agreement}}, for the way close-out happens under a [[pledge]] structure is markedly different from the [[close-out netting]] regime of the {{gmsla}}.
+===Control over assets and the desirability of a [[grace period]] before action===
 [[10 - Pledge GMSLA Provision|Now]] there’s a subtle point to look out for here about control over assets. If, as you are likely to have under a {{pgmsla}}, you have ''[[pledge]]d'' your assets to an [[escrow agent]] or third party [[custodian]], the key (for your financial reporting friends and relations) will be that you retain ownership of those assets and, more to the point, they stay ''outside'' the [[insolvency estate|bankruptcy estate]] of your {{pgmslaprov|Lender}}. That’s the whole reason you have the {{pgmsla}} and not an ordinary [[title-transfer]] {{gmsla}} in the first place — to avoid having to hold capital against the credit risk of your {{pgmslaprov|Lender}}s for the return of excess {{pgmslaprov|Collateral}}.
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 There’s — at this particular moment in time, and no other — a little ''tension'' in the air. As {{pgmslaprov|Borrower}} you need to satisfy your accountants that the assets really are yours, in case the {{pgmslaprov|Lender}} unexpectedly blows up; the {{pgmslaprov|Lender}} wants quick access to them, and to put aside all ceremony, in case ''you'' do.
-Should we be unthinkably deep in the tail of improbable market events  such that ''both'' parties are blowing up simultaneously — the sort of event that Fisher Black would tell you ''ought to be'' unobservable in a period several times the life in the universe, but that {{author|Nassim Nicholas Taleb}} lijkes to remind us ''does'' happen once every five years or so, these two contingencies can arrive at once. On the theory, the Borrower’s interest trumps the Lender’s, since the security interest keeps teh assets out of range of the Borrower’s other creditors. But that is cold comfort for most [[Credit officer|credit sanctioners]], and besides, they don’t want to hang around waiting when collateral values are pogo-ing around with all the market dislocation.
+Should we be unthinkably deep in the tail of improbable market events  such that ''both'' parties are blowing up simultaneously — the sort of event that Fisher Black would tell you ''ought to be'' unobservable in a period several times the life in the universe, but that {{author|Nassim Nicholas Taleb}} likes to remind us ''does'' happen once every five years or so — these two contingencies can arrive at once. On the theory, the {{pgmslaprov|Borrower}}’s interest trumps the Lender’s, since the security interest keeps the assets out of range of the {{pgmslaprov|Borrower}}’s other creditors. But that is cold comfort for most [[Credit officer|credit sanctioners]], and besides, they don’t want to hang around waiting when collateral values are pogo-ing around with all the market dislocation.
 Thus the dynamics dealing with who can tell the escrow agent to do what at any point in time are — ''sensitive'', shall we say. Nowhere did {{islacds}} address this in the document. It can be dealt with by a little [[grace period]], requiring the credit officer to wait, not for long, but for long enough to satisfy a financial reporting officer that there is enough time to settle any debts, call off the dogs and carry sedately on.
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 Try this:
-:''Each {{pgmslaprov|Event of Default}} listed in Paragraph {{pgmslaprov|10.1}}(a), (b) and (c) will become {{pgmslaprov|Events of Default}} only if, within 2 hours following the {{gmslaprov|Lender}}’s written notice to the {{gmslaprov|Borrower}} of the event in question, {{gmslaprov|Borrower}} has not cures the relevant default in full. Upon the expiry of that 2 hour period without such cure, the {{gmslaprov|Event of Default}} will occur immediately without the need for further notice from the {{pgmslaprov|Lender}}.''
+:''Each {{pgmslaprov|Event of Default}} listed in Paragraph {{pgmslaprov|10.1}}(a), (b) and (c) will become {{pgmslaprov|Events of Default}} only if, within 2 hours following the {{pgmslaprov|Lender}}’s written notice to the {{pgmslaprov|Borrower}} of the event in question, {{pgmslaprov|Borrower}} has not cured the relevant default in full. Upon the expiry of that 2-hour period without such cure, the {{pgmslaprov|Event of Default}} will occur immediately without the need for further notice from the {{pgmslaprov|Lender}}.''
+===I haven’t got a two-hour grace period! Is that a problem?===
+Those on the {{pgmsla}} standard form won’t have that [[grace period]] of course. Are you sunk? Possibly not, but you may have to undertake a lonely intellectual voyage taking in topics like [[Constructive|constructive trust]], tracing of assets, and [[tortious]] liability on the part of a third party’s agent for [[Appropriation|misappropriation]] of assets to get [[comfortable]].