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2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
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Section PPF Event in a Nutshell™
Use at your own risk, campers!
Full text of Section PPF Event
PPF Event: It shall be an Additional Termination Event (and Party A[2] shall be the Affected Party and all Transactions shall be Affected Transactions) when:
- (a) the Board of the Pension Protection Fund (“PPF”) approves under section 144 of the Pensions Act 2004 (the “Act”) a valuation under section 143 of the Act which verifies that Party A’s protected liabilities (within the meaning of section 131 of the Act) exceed its assets;
- (b) the PPF determines under section 152(2) that it must accept responsibility for the Scheme; or
- (c) the PPF approves under section 158(3) of the Act an actuarial valuation which verifies that Party A’s protected liabilities exceed its assets;
provided that in each case there shall be no Additional Termination Event if the PPF prior to termination by Party B has executed and issued a deed to Party B that it will not, following the issue of a transfer notice pursuant to section 160 of the Act, use its powers under section 161 of the Act (or any regulations made thereunder) to disapply or amend any terms or conditions of this Agreement or terminate this Agreement (unless such disapplication, or termination is permitted under the express terms of the Agreement).
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Summary
The Pension Protection Fund protects UK Pension Schemes upon their insolvency. This is of particular interest where a UK Pension Fund is party to an ISDA Master Agreement, because the PPF has wide discretionary powers to set aside contracts it doesn’t like and that can play havoc with your close-out netting analysis.
As a result much discussion around an Additional Termination Event specifically targeted at UK Pension Funds. See, for example, the PPF’s proposal — rather crappily drafted, we are bound to say — for a PPF Event ATE. (Note, unusually, they have decided that Party A is the Pension Fund, and not Party B, as will be most dealers’ preference (and generally the dealers prepare the docs).
“A solution was proposed from within the industry suggesting the inclusion of standard wording in agreements between the trustees and counterparties, without involvement of the PPF at that stage, and a consultation with stakeholders was commenced in March 2009. Following discussions with stakeholders, the following wording is proposed: [see panel]
We would strongly encourage trustees and managers to adopt this wording in ISDA contracts which they enter into or which are entered into on their behalf by their fund managers.”
See also
References
- ↑ The drafting is lax here: not clear whether this is designates an Early Termination Date or actually completes termination of all Affected Transactions.
- ↑ The drafting assumes the Pension Fund is Party A. Usually it will be Party B.