How Magic Circle drafting works

Rake’s Progress in reverse

What you start with	what you take out
The Noteholder shall use reasonable endeavours to grant (or procure the granting of), within the 15 Business Days following the occurrence of a Downgrade or such later date as agreed between the Noteholder and the Swap Counterparty, a unilateral, unconditional guarantee (the “Downgrade Contingent Guarantee”) to the Swap Counterparty (provided that the Swap Counterparty approves such form of Downgrade Contingent Guarantee) in respect of the performance of the Issuer’s obligations under the Swap Transaction from the time of the occurrence of any Downgrade, including, for the avoidance of doubt (i) the delivery of the relevant Deliverable Allowances (as defined in the Swap Agreement) in the event of any Early Delivery (as defined in the Swap Agreement), (ii) the payment of any Early Termination Amount due from the Issuer to the Swap Counterparty in respect of a Non-Exchange Delivery Failure Event (as defined in the Swap Agreement) and (iii) if the Swap Transaction is still outstanding on the Delivery Date (as defined in the Swap Agreement), the delivery of the Asset Collateral on the Delivery Date (as defined in the Swap Agreement) in accordance with the terms of the Swap Transaction (and including in respect of (i) and (iii) above procuring that sufficient Assets are held in the Custody Account for the Issuer to perform such delivery obligations at the relevant time or (if applicable) such that Liquidation may occur in respect of those Assets at the relevant time). Where a Downgrade has occurred and the transaction is restructured in accordance with Clause 10 (Exercise of Noteholder unwind option), any Downgrade Contingent Guarantee that is in place shall be deemed to be redundant in respect of the relevant Downgrade.	Step 1. Delete redundant text. The Noteholder shall use reasonable endeavours to grant (or procure the granting of) , within the 15 Business Days following the occurrence of a Downgrade or such later date as agreed between the Noteholder and the Swap Counterparty , a unilateral, unconditional guarantee (the “Downgrade Contingent Guarantee”) to the Swap Counterparty (provided that the Swap Counterparty approves such form of Downgrade Contingent Guarantee) in respect of the performance of the Issuer’s obligations under the Swap Transaction from the time of the occurrence of any Downgrade, including, for the avoidance of doubt (i) the delivery of the relevant Deliverable Allowances (as defined in the Swap Agreement) in the event of any Early Delivery (as defined in the Swap Agreement), (ii) the payment of any Early Termination Amount due from the Issuer to the Swap Counterparty in respect of a Non-Exchange Delivery Failure Event (as defined in the Swap Agreement) and (iii) if the Swap Transaction is still outstanding on the Delivery Date (as defined in the Swap Agreement), the delivery of the Asset Collateral on the Delivery Date (as defined in the Swap Agreement) in accordance with the terms of the Swap Transaction (and including in respect of (i) and (iii) above procuring that sufficient Assets are held in the Custody Account for the Issuer to perform such delivery obligations at the relevant time or (if applicable) such that Liquidation may occur in respect of those Assets at the relevant time) . Where a Downgrade has occurred and the transaction is restructured in accordance with Clause 10 (Exercise of Noteholder unwind option), any Downgrade Contingent Guarantee that is in place shall be deemed to be redundant in respect of the relevant Downgrade .
The Noteholder shall use reasonable endeavours to procure, within the 15 Business Days following the occurrence of a Downgrade, a unilateral, unconditional guarantee (the “Downgrade Contingent Guarantee”) to the Swap Counterparty (provided that the Swap Counterparty approves such form of Downgrade Contingent Guarantee) of the Issuer’s obligations under the Swap. Where a Downgrade has occurred and the transaction is restructured in accordance with Clause 10 (Exercise of Noteholder unwind option), any Downgrade Contingent Guarantee that is in place shall be deemed to be redundant.	Step 2. simplify contorted and archaic expressions. The Noteholder shall must use reasonable endeavours efforts to procure, within the 15 Business Days following the occurrence of a Downgrade, a unilateral, unconditional guarantee (the “Downgrade Contingent Guarantee”) to the Swap Counterparty (provided that the in a form satisfactory to Swap Counterparty approves such form of Downgrade Contingent Guarantee ) of the Issuer’s obligations under the Swap. Where a Downgrade has already occurred and the transaction is has been restructured in accordance with Clause 10 (Exercise of Noteholder unwind option), any existing Downgrade Contingent Guarantee that is in place shall be deemed to be redundant will not apply.
The Noteholder must use reasonable efforts to procure, within the 15 Business Days of a Downgrade, a unilateral, unconditional guarantee (the “Downgrade Contingent Guarantee”) to the Swap Counterparty (in a form satisfactory to Swap Counterparty) of the Issuer’s obligations under the Swap. Where a Downgrade has already occurred and the transaction has been restructured in accordance with Clause 10 (Exercise of Noteholder unwind option), any existing Downgrade Contingent Guarantee will not apply.	Step 3. Sand down rough edges and note the questions that start to arise. The Noteholder must use reasonable efforts to procure arrange, within the 15 Business Days of a Downgrade, a unilateral, an unconditional guarantee [from whom?] of the Issuer’s obligations under the Swap (the “Downgrade Contingent Guarantee”) to the Swap Counterparty of the Issuer’s obligations under the Swap ( in a form satisfactory to Swap Counterparty) . Where a Downgrade has already occurred and the transaction has been restructured in accordance with under Clause 10 (Exercise of Noteholder unwind option), any existing Downgrade Contingent Guarantee will not apply.
The Noteholder must use reasonable efforts to arrange, within 15 Business Days of a Downgrade, an unconditional guarantee of the Issuer’s obligations under the Swap (the “Downgrade Guarantee”) in a form satisfactory to Swap Counterparty. Where a Downgrade has already occurred and the transaction has been restructured under Clause 10 (Exercise of Noteholder unwind option), any existing Downgrade Guarantee will not apply.	Step 4 Start answering questions and begin to tell the story a bit better. T If there is a Downgrade, the Noteholder Issuer [Why Noteholder? It is incentivised to, but this is Issuer’s problem to arrange] must use reasonable efforts to arrange, within 15 Business Days of a Downgrade , an unconditional guarantee of the Issuer’s its obligations under the Swap (the “Downgrade Guarantee”) in a form and from a guarantor satisfactory to Swap Counterparty. Where If, following a Downgrade , has already occurred and the transaction has been restructured Noteholder has exercised its unwind option under Clause 10 (Exercise of Noteholder unwind option) , any existing Downgrade Guarantee will not apply.
If there is a Downgrade, Issuer must use reasonable efforts to arrange, within 15 Business Days, an unconditional guarantee of its obligations under the Swap (the “Downgrade Guarantee”) in a form and from a guarantor satisfactory to Swap Counterparty. If, following a Downgrade, the Noteholder has exercised its unwind option under Clause 10, any existing Downgrade Guarantee will not apply.	Step 5. More questions. We are getting closer to the heart of the matter. If there is a Downgrade, Issuer must use reasonable efforts to arrange, within 15 Business Days, an unconditional guarantee of its obligations under the Swap (the “Downgrade Guarantee”) in a form and from a guarantor satisfactory to Swap Counterparty. [What happens if it doesn’t?] If, following a Downgrade, the Noteholder has exercised its unwind option under Clause 10, any existing Downgrade Guarantee will not apply. [If the Notes have unwound there will be no Swap to guarantee.]
If there is a Downgrade, Issuer must use reasonable efforts to arrange, within 15 Business Days, an unconditional guarantee of its obligations under the Swap (the “Downgrade Guarantee”) in a form and from a guarantor satisfactory to Swap Counterparty.	Step 6. Answer questions. If there is a Downgrade , and Issuer must use reasonable efforts to has not arrange d, within 15 Business Days, an unconditional guarantee of its obligations under the Swap (the “Downgrade Guarantee”) in a form and from a guarantor satisfactory to Swap Counterparty (the “Downgrade Guarantee”) within 15 Business Days, Swap Counterparty may designate an Early Termination Date under the Swap .
If there is a Downgrade and Issuer has not arranged an unconditional guarantee of its obligations under the Swap in a form and from a guarantor satisfactory to Swap Counterparty within 15 Business Days, Swap Counterparty may designate an Early Termination Date under the Swap.