Template talk:Isda Automatic Early Termination summ

Imagine you are the credit officer in the commercial division of a local. One of your customers has borrowed 100 million quid from the bank in the form of a fixed rate term loan. Things have not worked well for the customer and it has fallen into bankruptcy. There are many ways of falling into bankruptcy and – 8 at least by izza's Reckoning and that, but for our purposes it doesn't much matter which. The banks position, however you look at it, is more or less the same: f*****. The bank is an unsecured creditor of the company and we'll line up with all of its other unsecure creditors and fall upon the mercy of the insolvency administrator I pointed by the court to wind up the company's affairs.

Now entering the formal status of bankruptcy it's something of a phase transition in the philosophy of company law. The legal regime changes; certain certainties are lost and vagories and discretions arise. The insolvency administrator becomes a person of great power and influence comma invested in wide discretions to ensure the right thing is done by the companies creditors, customers, shareholders, and employees. In some jurisdictions the commencement of bankruptcy proceedings also creates unusual suspensions or stays on legal contracts and legal remedies available to a solvent companies creditors. Once right to call alone maybe suspended, for example

As far is a lending bank is concerned, a form formal suspension of the legal right to claim from an insolvent customer money that it does not in any case have is really right rather neither here nor there

Indeed ,from the banks perspective as unsecured creditor none of these discretions conferred upon this administrator really make a great deal of difference: it was owed 100 million pounds; it's going to get back something significantly less than that. A legal rights to claim payment from a company with no money isn't worth very much.

The main mischief with which insolvency regulations are concerned is ensuring that the various creditism stakeholders of a company are treated fairly: no one precipitately jumps the gun grabs all the juicy assets and makes off with them hence much talk about avoidable preferences and such magical things.