Default - VM CSA Provision

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2016 ISDA Credit Support Annex (VM) (English law)
A Jolly Contrarian owner’s manual™

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Paragraph 6 in a Nutshell

Use at your own risk, campers!
6. Default.

If there is an Early Termination Date following an Event of Default, the Value of the Credit Support Balance (VM), determined of the Early Termination Date, will be an Unpaid Amount due to the Transferor under Section 6(e). For the Transaction represented by this Annex:

(a) any Market Quotation will be zero;
(b) any Loss will be limited to the Unpaid Amount representing the Value of the relevant Credit Support Balance (VM) and any unsatisfied Interest Payment (VM) obligations;
(c) any Close-out Amount will be zero; and
(d) there will be no Unpaid Amount relating to any unsatisfied obligation under Paragraph 2 or Paragraph 3(c).

Full text of Paragraph 6

6. Default.
If an Early Termination Date is designated or deemed to occur as a result of an Event of Default in relation to a party, an amount equal to the Value of the Credit Support Balance (VM), determined as though the Early Termination Date were a Valuation Date, will be deemed to be an Unpaid Amount due to the Transferor (which may or may not be the Defaulting Party) for purposes of Section 6(e). For the avoidance of doubt (a) any Market Quotation determined under Section 6(e) in relation to the Transaction constituted by this Annex will be deemed to be zero, (b) any Loss determined under Section 6(e) in relation to the Transaction constituted by this Annex will be limited to the Unpaid Amount representing the Value of the relevant Credit Support Balance (VM) and any unsatisfied obligations with respect to the transfer of an Interest Payment (VM); (c) any Close-out Amount determined under Section 6(e) in relation to the Transaction constituted by this Annex will be deemed to be zero; and (d) no Unpaid Amount will be determined with respect to an unsatisfied obligation under Paragraph 2 and Paragraph 3(c).


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References