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In a Nutshell™ Section 9:
9 Miscellaneous
9(a) Default Interest. Except where there is a Dispute:
- (i) if a Transferee fails to make any transfer when due, any Return Amount or income Distribution it must pay interest at the Default Rate on the Value as of the Valuation Date, of the items not transferred, from (and including) the due date for transfer to (but excluding) their actual date of transfer, compounding daily.
- (ii) if an Interest Payer (VM) fails to make, when due, any transfer of an Interest Payment (VM), it must pay the Interest Payee (VM) interest at the Default Rate (and for such purposes, if the Default Rate is less than zero, it will be deemed to be zero) multiplied by that Interest Payment (VM), from the due date for payment to (but excluding) their actual date of payment, compounding daily.
9(b) Good Faith and Commercially Reasonable Manner. The parties must perform all obligations under this Annex, in good faith and in a commercially reasonable manner.
9(c) Demands and Notices. Section 12 of the ISDA Master Agreement applies.
9(d) Specifications of Certain Matters. If this Annex says something can be “specified in Paragraph 11”, you can specify it in a Confirmation or other document between the parties, too.
Template:Nutshell 2016 CSA 9(e)
Template:Nutshell 2016 CSA 9(f)
Template:Nutshell 2016 CSA 9(g)
Template:Nutshell 2016 CSA 9(h)
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2016 VM CSA full text of Section 9:
Paragraph 9. Miscellaneous
9(a) Default Interest. Other than in the case of an amount which is the subject of a dispute under Paragraph 4, if a Transferee fails to make, when due, any transfer of Equivalent Credit Support (VM) or Equivalent Distributions, it will be obliged to pay the Transferor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value on the relevant Valuation Date of the items of property that were required to be transferred, from (and including) the date that the Equivalent Credit Support (VM) or Equivalent Distributions were required to be transferred to (but excluding) the date of transfer of the Equivalent Credit Support (VM) or Equivalent Distributions. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. Other than in the case of an amount which is the subject of a dispute under Paragraph 4, if an Interest Payer (VM) fails to make, when due, any transfer of an Interest Payment (VM), it will be obliged to pay the Interest Payee (VM) (to the extent permitted under applicable law) an amount equal to interest at the Default Rate (and for such purposes, if the Default Rate is less than zero, it will be deemed to be zero) multiplied by that Interest Payment (VM), from (and including) the date that Interest Payment (VM) was required to be transferred to (but excluding) the date of transfer of that Interest Payment (VM). This interest will be calculated on the basis of daily compounding and the actual number of days elapsed.
9(b) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner.
9(c) Demands and Notices. All demands and notices given by a party under this Annex will be given as specified in Section 12 of this Agreement.
9(d) Specifications of Certain Matters. Anything referred to in this Annex as being specified in Paragraph 11 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly.
9(e) Legally Ineligible Credit Support (VM).
Unless otherwise specified in Paragraph 11, upon delivery of a Legal Ineligibility Notice by a party, each item of Eligible Credit Support (VM) (or a specified amount of such item) identified in such notice
- (i) will cease to be Eligible Credit Support (VM) for purposes of transfers to such party as the Transferee hereunder as of the applicable Transfer Ineligibility Date,
- (ii) will cease to be Eligible Credit Support (VM) for the other party as the Transferor for all purposes hereunder (other than for the purposes of the definitions of Credit Support Balance (VM) and Equivalent Credit Support (VM)) as of the Total Ineligibility Date and
- (iii) will have a Value of zero on and from the Total Ineligibility Date, other than for the purposes of Paragraph 6.
“Legal Ineligibility Notice” means a written notice from the Transferee to the Transferor in which the Transferee
- (i) represents that the Transferee has determined that one or more items of Eligible Credit Support (VM) (or a specified amount of any such item) either has ceased to satisfy, or as of a specified date will cease to satisfy, collateral eligibility requirements under law applicable to the Transferee requiring the collection of variation margin (the “Legal Eligibility Requirements”),
- (ii) lists the item(s) of Eligible Credit Support (VM) (and, if applicable, the specified amount of such item) that have ceased to satisfy, or as of a specified date will cease to satisfy, the Legal Eligibility Requirements,
- (iii) describes the reason(s) why such item(s) of Eligible Credit Support (VM) (or the specified amount thereof) have ceased to satisfy, or will cease to satisfy, the Legal Eligibility Requirements and
- (iv) specifies the Total Ineligibility Date and, if different, the Transfer Ineligibility Date.
“Total Ineligibility Date” means the date on which the relevant item of Eligible Credit Support (VM) (or a specified amount of such item) has ceased to satisfy, or will cease to satisfy, the Legal Eligibility Requirements applicable to the Transferee for all purposes hereunder, provided that, unless otherwise specified in Paragraph 11, if such date is earlier than the fifth Local Business Day following the date on which the Legal Ineligibility Notice is delivered, the Total Ineligibility Date will be the fifth Local Business Day following the date of such delivery.
“Transfer Ineligibility Date” means the date on which the relevant item of Eligible Credit Support (VM) (or a specified amount of such item) has ceased to satisfy, or will cease to satisfy, the Legal Eligibility Requirements for purposes of transfers to the Transferee hereunder, provided that, unless otherwise specified in Paragraph 11, if such date is earlier than the fifth Local Business Day following the date on which the Legal Ineligibility Notice is delivered, the Transfer Ineligibility Date will be the fifth Local Business Day following the date of such delivery.
9(f) Return of Equivalent Credit Support (VM). The Transferee will, promptly upon demand (but in no event later than the time at which a transfer would be due under Paragraph 3(a) with respect to a demand for the transfer of Eligible Credit Support (VM) or Equivalent Credit Support (VM)), transfer to the Transferor Equivalent Credit Support (VM) in respect of any item comprised in the Credit Support Balance (VM) (or the specified amount of such item) that as of the date of such demand has a Value of zero; provided that the Transferee will only be obligated to transfer any Equivalent Credit Support (VM) in accordance with this Paragraph 9(f), if, as of the date of transfer of such item, the Transferor has satisfied all of its transfer obligations under this Annex, if any.
9(g) Reinstatement of Credit Support Eligibility. Upon a reasonable request by the Transferor, the Transferee will determine whether an item (or a specified amount of such item) of Eligible Credit Support (VM) that was the subject of a prior Legal Ineligibility Notice would currently satisfy the Legal Eligibility Requirements applicable to the Transferee. If the Transferee determines that as of such date of determination such item (or specified amount of such item) satisfies the Legal Eligibility Requirements applicable to the Transferee, the Transferee will promptly following such determination rescind the relevant Legal Ineligibility Notice with respect to such item (or specified amount of such item) by written notice to the Transferor. Upon the delivery of such notice, the relevant item (or specified amount of such item) will constitute Eligible Credit Support (VM) hereunder.
9(h) Credit Support Offsets. If the parties specify that “Credit Support Offsets” is applicable in Paragraph 11 and on any date:
- (i) a transfer of Eligible Credit Support (VM) or Equivalent Credit Support (VM) is due under this Annex to satisfy a Delivery Amount (VM) or a Return Amount (VM) obligation, and a transfer of credit support (other than any Other CSA Excluded Credit Support) is also due under any Other CSA;
- (ii) the parties have notified each other of the credit support that they intend to transfer under this Annex and transfer under such Other CSA (other than any Other CSA Excluded Credit Support) to satisfy their respective obligations; and
- (iii) in respect of Paragraph 9(h)(ii), each party intends to transfer one or more types of credit support that is fully fungible with one or more types of credit support the other party intends to transfer (each such credit support, a “Fungible Credit Support Type”),
then, on such date and in respect of each such Fungible Credit Support Type, each party’s obligation to make a transfer of any such Fungible Credit Support Type hereunder or under such Other CSA will be automatically satisfied and discharged and, if the aggregate amount that would have otherwise been transferred by one party exceeds the aggregate amount that would have otherwise been transferred by the other party, replaced by an obligation hereunder or under such Other CSA, as applicable, upon the party by which the larger aggregate amount would have been transferred to transfer to the other party the excess of the larger aggregate amount over the smaller aggregate amount. If a party’s obligation to make a transfer of credit support under this Annex or an Other CSA is automatically satisfied and discharged pursuant to this Paragraph 9(h), then for purposes of this Annex or the Other CSA, as applicable, the other party will be deemed to have received credit support of the applicable Fungible Credit Support Type in the amount that would otherwise have been required to be transferred, in each case on the day on which the relevant transfer was due.
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Related Agreements
Click here for the text of Section 9 in the 1995 English Law CSA
Click here for the text of Section 9 in the 2016 English Law VM CSA
Click [[{{{3}}} - NY VM CSA Provision|here]] for the text of the equivalent, Section [[{{{3}}} - NY VM CSA Provision|{{{3}}}]] in the 2016 NY Law VM CSA
Comparisons
1995 CSA and 2016 VM CSA: click for comparison
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