Template:M comp disc 2002 ISDA 5(a)(vi): Difference between revisions

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''This article is specifically about the {{isdaprov|Cross Default}} provision in the {{isdama}}. For a general discussion of the concept, see [[cross default]].
{{isda 5(a)(vi) comp|isdaprov}}
 
The {{2002ma}} updates the {{1992ma}}’s {{isda92prov|Cross Default}} so that if the combined amount outstanding under the two limbs of {{isdaprov|Cross Default}} exceed the {{isdaprov|Threshold Amount}}, then it will be an {{isdaprov|Event of Default}}. Normally, under the {{1992ma}}, {{isdaprov|Cross Default}} requires one ''or'' the other limbs to be satisfied — you can’t add them together. This was a bit of a snafu. The two limbs are:
*a default under a financial agreement that would allow a creditor to [[accelerate]] any [[indebtedness]] that party owes it;
*a [[failure to pay]] on the due date under such agreements after the expiry of a [[grace period]].

Latest revision as of 15:35, 24 December 2023

The 2002 ISDA updates the 1992 ISDA’s Cross Default so that if the combined amount outstanding under the two limbs of Cross Default exceed the Threshold Amount, then it will be an Event of Default. Normally, under the 1992 ISDA, Cross Default requires one or the other limbs to be satisfied — you can’t add them together. This was a bit of a snafu.

The two limbs are:

  1. a default under a financial agreement that would allow a creditor to accelerate any indebtedness that party owes it;
  2. a failure to pay on the due date under such agreements after the expiry of a grace period.

Cross default in securities financing arrangements

Neither the 2010 GMSLA nor the Global Master Repurchase Agreement have, as standard, either a cross default or a default under specified transaction provision. Unless some bright spark thinks it is a good idea to negotiate one in.

Comaprison with cross acceleration

Cross acceleration is essentially cross default only tweaked such that it is only triggered on actual acceleration of 3rd party indebtedness rather than the mere potential for acceleration. This is enough of a difference to make it worth its own page so if you're interested in that please see Cross Acceleration.

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