Template:M summ Pledge GMSLA 11: Difference between revisions

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Anyway, the process on any {{pgmslaprov|Event of Default}} — but let’s presume for the sake of simplicity it is one committed by the {{pgmslaprov|Borrower}} — is this:
Anyway, the process on any {{pgmslaprov|Event of Default}} — but let’s presume for the sake of simplicity it is one committed by the {{pgmslaprov|Borrower}} — is this:
*All {{pgmslaprov|Loan}}s are all accelerated, and the {{pgmslaprov|Borrower}} is liable to return {{eqderivprov|Equivalent}} {{pgmslaprov|Securities}} as at the time of default. It won’t be able to of course, for the reasons given above.  
*All {{pgmslaprov|Loan}}s are all accelerated, and the {{pgmslaprov|Borrower}} is liable to return {{eqderivprov|Equivalent}} {{pgmslaprov|Securities}} as at the time of default. It won’t be able to of course, for the reasons given above.  
*So the {{pgmslaprov|Lender}} works out the {{pgmslaprov|Default Market Value}} of the {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}. It does this selling {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}, getting and averaging quotes for the sale<ref>''Or purchase, but as discussed only an idiot Borrower would use the close-out provisions to terminate a Loan where a Lender defaulted.</ref> of {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}, or, if it can’t, or the quotes seem out of whack, it can come up with its own opinion of their value, factor in any notional {{pgmslaprov|Transaction Costs}}, and use that. Expect an aggrieved Lender to confabulate some difficulty in getting good quotes and to go for using its own opinion more often than you’d necessarily expect. The {{pgmslaprov|Borrower}}’s bust, so what does he care, right?
*So the {{pgmslaprov|Lender}} works out the {{pgmslaprov|Default Market Value}} of the {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}. It does this selling {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}, getting and averaging quotes for the sale<ref>''Or'' purchase, but as discussed only an idiot {{pgmslaprov|Borrower}} would use the close-out provisions to terminate a {{pgmslaprov|Loan}} where a {{pgmslaprov|Lender}} defaulted.</ref> of {{pgmslaprov|Equivalent}} {{pgmslaprov|Securities}}, or, if it can’t, or the quotes seem out of whack, it can come up with its own opinion of their value, factor in any notional {{pgmslaprov|Transaction Costs}}, and use that. Expect an aggrieved Lender to confabulate some difficulty in getting good quotes and to go for using its own opinion more often than you’d necessarily expect. The {{pgmslaprov|Borrower}}’s bust, so what does he care, right?
*The Lender can also confabulate I mean reasonably calculate its legal costs of closing out, and add those to the {{pgmslaprov|Default Market Value}}
*The Lender can also confabulate I mean reasonably calculate its legal costs of closing out, and add those to the {{pgmslaprov|Default Market Value}}
*Lastly, it can set off against amounts it owes to the {{pgmslaprov|Borrower}} but, unlike under the title transfer {{gmsla}}, there aren’t likely to be many, seeing as the Collateral leg is not a title transfer collateral arrangement and is still technically owned by the {{pgmslaprov|Borrower}}. But not for long.  
*Lastly, it can set off against amounts it owes to the {{pgmslaprov|Borrower}} but, unlike under the title transfer {{gmsla}}, there aren’t likely to be many, seeing as the Collateral leg is not a title transfer collateral arrangement and is still technically owned by the {{pgmslaprov|Borrower}}. But not for long.  


Unlike under the {{gmsla}} the netting mechanic doesn’t ''do'' much. There isn’t much to net. The Lender has a large claim against the Borrower, for the {{pgmslaprov|Default Market Value}}, and it satisfies this by enforcing security under a separate {{pgmslaprov|Security Deed}}.
Unlike under the {{gmsla}} the netting mechanic doesn’t ''do'' much. There isn’t much to net. The {{pgmslaprov|Lender}} has a large claim against the {{pgmslaprov|Borrower}}, for the {{pgmslaprov|Default Market Value}}, and it satisfies this by enforcing its security under a separate {{pgmslaprov|Security Deed}}. To reiterate what should be obvious, under a pledged collateral arrangement the credit mitigation is by way of [[Security interest|security]], not [[Close-out netting|netting]].
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