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ISDA Anatomy™
In a Nutshell™ Section 5(a):
5(a) Events of Default
Any of the following events occurring to a party or its Credit Support Provider or Specified Entity will (subject to Sections 5(c) and 6(e)(iv)) be an “Event of Default”) for that such party:—
- 5(a)(i). Failure to Pay or Deliver. Failure by a party to make any payment or delivery when due under this Agreement which is not remedied by the first Local Business Day or Local Delivery Day after the party receives notice of the failure;
- 5(a)(ii) “Breach of Agreement” means:
- (1) a party breaches any of its obligations under the Agreement and doesn’t remedy the breach within 30 days of the other party’s notice other than the following:
- (a) a Failure to Pay or Deliver;
- (b) owning up to a Termination Event;
- (c) not providing any necessary tax documents;
- (d) any of its tax representations not being true; or
- (2) a party repudiates this ISDA Master Agreement or any Transaction.
- 5(a)(iii) Credit Support Default.
- (1) The party or its Credit Support Provider defaults under any Credit Support Document after any grace period has expired;
- (2) Any Credit Support Document (or any security interest granted under one) terminates or becomes ineffective (except according to its terms) while any covered Transaction without the other party’s written consent; or
- (3) the party or its Credit Support Provider repudiates any obligations under Credit Support Document;
- 5(a)(iv) Misrepresentation. A representation (other than a Payee or Payer Tax Representation) made under this Agreement or a Credit Support Document was materially incorrect or misleading when it was made;
- 5(a)(v) Default Under Specified Transaction. The party or one of its Credit Support Providers or Specified Entities:―
- (1) defaults on any payment due under a Specified Transaction (or any related credit support arrangement) and as a result that Specified Transaction is validly accelerated;
- (2) defaults on any final payment due under a Specified Transaction after one Local Business Day;
- (3) defaults on any delivery due under a Specified Transaction (or any related credit support arrangement) and, all Transactions under the relevant Master Agreement are validly accelerated; or
- (4) repudiates any Specified Transaction (or any related credit support arrangement);
- 5(a)(vi) Cross-Default. If “Cross-Default” applies to a party, it will be an Event of Default if:
- (1) any agreements it (or its Credit Support Providers or Specified Entities) has for Specified Indebtedness become capable of acceleration; or
- (2) it (or its Credit Support Providers or Specified Entities) defaults on any payment of Specified Indebtedness (and any grace period expires);
- And the total of the principal amounts in (1) and (2) exceeds the Threshold Amount.
- 5(a)(vii). Bankruptcy. A party of its Credit Support Provider or Specified Entity:―
- (1) Dissolved: is dissolved (other than by merger);
- (2) Insolvent: becomes insolvent, unable to pay its debts, or admits it in writing;
- (3) Composition with Creditors: makes a composition with its creditors;
- (4) Insolvency Proceedings: suffers insolvency proceedings instituted by:
- (A) a regulator; or
- (B) anyone other than a regulator, and
- (I) it results in a winding up order; or
- (II) those proceedings are not discharged within 15 days;
- (5) Voluntary Winding Up: resolves to wind itself up (other than by merger);
- (6) Put in Administration: has an administrator, provisional liquidator, or similar appointed for it or for substantially all its assets;
- (7) Security Exercised: has a secured party take possession of, or a legal process is enforced against, substantially all its assets for at 15 days without a court dismissing it;
- (8) Analogous events: suffers any event which, under the laws of any jurisdiction, has the same effect as any of the above events; or
- (9) Action in furtherance: takes any action towards any of the above events.
- 5(a)(viii) Merger Without Assumption. The party (or a Credit Support Provider) merges with or transfers or all or substantially all its assets to another entity and:―
- (1) the resulting entity does not assume all the original party’s obligations under this Agreement (or Credit Support Document); or
- (2) the Credit Support Document does cover the resulting party’s obligations under this Agreement.
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2002 ISDA full text of Section 5(a):
5(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes (subject to Sections 5(c) and 6(e)(iv)) an event of default (an “Event of Default”) with respect to such party:
- 5(a)(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 9(h)(i)(2) or 9(h)(i)(4) required to be made by it if such failure is not remedied on or before the first Local Business Day in the case of any such payment or the first Local Delivery Day in the case of any such delivery after, in each case, notice of such failure is given to the party;
- 5(a)(ii) Breach of Agreement; Repudiation of Agreement.
- (1) Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 9(h)(i)(2) or (4) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied within 30 days after notice of such failure is given to the party; or
- (2) the party disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, this Master Agreement, any Confirmation executed and delivered by that party or any Transaction evidenced by such a Confirmation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
- 5(a)(iii) Credit Support Default.
- (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed;
- (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document, or any security interest granted by such party or such Credit Support Provider to the other party pursuant to any such Credit Support Document, to be in full force and effect for the purpose of this Agreement (in each case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
- (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
- 5(a)(iv) Misrepresentation. A representation (other than a representation under Section 3(e) or 3(f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;
- 5(a)(v) Default Under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:―
- (1) defaults (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction;
- (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no applicable notice requirement or grace period, such default continues for at least one Local Business Day);
- (3) defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions outstanding under the documentation applicable to that Specified Transaction; or
- (4) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or evidenced by a document or other confirming evidence executed and delivered by that party, Credit Support Provider or Specified Entity (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
- 5(a)(vi) Cross-Default. If “Cross-Default” is specified in the Schedule as applying to the party, the occurrence or existence of:―
- (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) where the aggregate principal amount of such agreements or instruments, either alone or together with the amount, if any, referred to in clause (2) below, is not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments before it would otherwise have been due and payable; or
- (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments under such agreements or instruments on the due date for payment (after giving effect to any applicable notice requirement or grace period) in an aggregate amount, either alone or together with the amount, if any, referred to in clause (1) above, of not less than the applicable Threshold Amount;
- 5(a)(vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:―
- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger);
- (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due;
- (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors;
- (4)
- (A) institutes or has instituted against it, by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office, a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation by it or such regulator, supervisor or similar official, or
- (B) has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a petition is presented for its winding-up or liquidation, and such proceeding or petition is instituted or presented by a person or entity not described in clause (A) above and either
- (I) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or
- (II) is not dismissed, discharged, stayed or restrained in each case within 15 days of the institution or presentation thereof;
- (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger);
- (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets;
- (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 15 days thereafter;
- (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) above (inclusive); or
- (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or
- 5(a)(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganises, reincorporates or reconstitutes into or as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganisation, reincorporation or reconstitution:―
- 5(a)(viii)(1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party; or
- 5(a)(viii)(2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement.
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Click here for the text of Section 5(a) in the 1992 ISDA
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