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2010 Global Master Securities Lending Agreement
A Jolly Contrarian owner’s manual™
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Clause 9 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 9
9. Failure to Deliver
9.1 Borrower’s failure to deliver Equivalent Securities: If Borrower fails to deliver Equivalent Securities in accordance with paragraph 8.3 Lender may:
- (a) elect to continue the Loan (which, for the avoidance of doubt, shall continue to be taken into account for the purposes of paragraph 5.4 or 5.5 as applicable); or
- (b) at any time while such failure continues, by written notice to Borrower declare that that Loan (but only that Loan) shall be terminated immediately in accordance with paragraph 11.2 as if:
- (i) an Event of Default had occurred in relation to the Borrower,
- (ii) references to the Termination Date were to the date on which notice was given under this sub paragraph, and
- (iii) the Loan were the only Loan outstanding.
- For the avoidance of doubt, any such failure shall not constitute an Event of Default (including under paragraph 10.1(i)) unless the Parties otherwise agree.
9.2 Lender’s failure to deliver Equivalent Collateral: If Lender fails to deliver Equivalent Collateral comprising Non Cash Collateral in accordance with paragraph 8.4 or 8.5, Borrower may:
- (a) elect to continue the Loan (which, for the avoidance of doubt, shall continue to be taken into account for the purposes of paragraph 5.4 or 5.5 as applicable); or
- (b) at any time while such failure continues, by written notice to Lender declare that that Loan (but only that Loan) shall be terminated immediately in accordance with paragraph 11.2 as if
- (i) an Event of Default had occurred in relation to the Lender,
- (ii) references to the Termination Date were to the date on which notice was given under this sub paragraph, and
- (iii) the Loan were the only Loan outstanding.
- For the avoidance of doubt, any such failure shall not constitute an Event of Default (including under paragraph 10.1(i)) unless the Parties otherwise agree.
9.3 Failure by either Party to deliver: Where a Party (the Transferor) fails to deliver Equivalent Securities or Equivalent Collateral by the time required under this Agreement or within such other period as may be agreed between the Transferor and the other Party (the Transferee) and the Transferee:
- (a) incurs interest, overdraft or similar costs and expenses; or
- (b) incurs costs and expenses as a direct result of a Buy in exercised against it by a third party,
then the Transferor agrees to pay within one Business Day of a demand from the Transferee and hold harmless the Transferee with respect to all reasonable costs and expenses listed in sub paragraphs (a) and (b) above properly incurred which arise directly from such failure other than (i) such costs and expenses which arise from the negligence or wilful default of the Transferee and (ii) any indirect or consequential losses.
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Related agreements and comparisons
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Content and comparisons
9. Failure to Deliver
- 9.1 Borrower’s failure to deliver Equivalent Securities
- 9.2 Lender’s failure to deliver Equivalent Collateral
- 9.3 Failure by either Party to deliver
Paragraph 9 of the 2010 GMSLA is broadly the same in the 2018 Pledge GMSLA, only with no reference to failure by the Lender to return Equivalent Collateral, all for the sensible reason that, under the 2018 Pledge GMSLA construct, the Lender never gets its mitts on the Collateral in the first place, so is hardly in a position to fail to return it.
Comparable master agreements
We are given to understand that neither the 2010 GMRA, its American cousin the 1995 MRA nor the American stock lending agreement the 2017 MSLA have comparable mini-close-out provisions, though it is understood as a matter of good form that where there has been a simple innocent settlement failure and one can safely buy in — thereby helping oneself — one would never be so vulgar or unsportspersonlike as to actually call an Event of Default. And the market seems cool with that — cognitive dissonance to the power of one — until it comes to worrying whether that will impact a cross-default under a neighbouring ISDA Master Agreement, at which point the buyside market flips out — cognitive dissonance to the power of a trillion.
Summary
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