Calculations - 1987 ISDA Provision

1987 ISDA Interest Rate and Currency Exchange Agreement

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Overview — Summary — Premium — See also — Wikitext

Crosscheck:
→’87 equivalent
→’92 equivalent
→’02 equivalent

6(d) in a Nutshell™

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Original text

6(d) Calculations. 6(d)(i) Statement. Following the occurrence of an Early Termination Date, each party will make the calculations (including calculation of applicable interest rates) on its part contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations) and (2) giving details of the relevant account to which any payment due to it under Section 6(e) is to be made. In the absence of written continuation of a quotation obtained in determining a Market Quotation from the source providing such quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. 6(d)(ii) Due Date. The amount calculated as being payable under Section 6(e) will be due on the day that notice of the amount payable is effective (in the case of an Early Tem1ination Date which is designated or deemed to occur as a result of an Event of Default) and not later than the day which is two Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon in the Termination Currency from (and including) the relevant Early Termination Date to (but excluding) the relevant due date, calculated as follows:- (1) if notice is given designating an Early Termination Date or if an Early Termination Date is deemed to occur, in either case as a result of an Event of Default, at the Default Rate; or (2) if notice is given designating an Early Termination Date as a result of a Termination Event, at the Default Rate minus I% per annum. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA.

The Varieties of ISDA Experience
Subject	2002 (wikitext)	1992 (wikitext)	1987 (wikitext)
Preamble	Pre	Pre	Pre
Interpretation	1	1	1
Obligns/Payment	2	2	2
Representations	3	3	3
Agreements	4	4	4
EODs & Term Events	5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE	5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE	5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM
Early Termination	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off	6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET
Transfer	7	7	7
Contractual Currency	8	8	8
Miscellaneous	9	9	9
Offices; Multibranch Parties	10	10	10
Expenses	11	11	11
Notices	12	12	12
Governing Law	13	13	13
Definitions	14	14	14
Schedule	Schedule	Schedule	Schedule
Termination Provisions	Part 1	Part 1	Part 1
Tax Representations	Part 2	Part 2	Part 2
Documents for Delivery	Part 3	Part 3	Part 3
Miscellaneous	Part 4	Part 4	Part 4
Other Provisions	Part 5	Part 5	Part 5

Resources and Navigation

Index: Click ᐅ to expand: ISDA

Comparisons

Broadly similar between the versions. Main differences are basic architectural ones (no definition of “Early Termination Amount” or “Close-out Amount” in the 1992 ISDA, for example), and the 2002 is a little more finicky, dealing with what to do if there are two Affected Parties, and also blithering on for a few lines about interest.

Basics

Section 6(d) is to do with working out the termination value of Transactions for which you’ve just designated an Early Termination Date (or, in the 1992 ISDA, the thing you wished they’d defined as an Early Termination Date).

Under the ’92 one uses Loss and Market Quotation, and all that Second Method malarkey, and in the 2002 ISDA the much neater and tidier Close-out Amount concept.

Generally, this is good fat-tail paranoia material, so once upon a time parties used to negotiate it heavily. General SME-drain from the negotiation talent pool over the years due to vigorous down-skilling means people are less fussed about it now.

A popular parlour game among those pedants who still insist on using the 1992 ISDA — or, in fairness, are forced to by some other pedant further up their chain, or a general institutional disposition towards pedantry — is to laboriously upgrade every inconsistent provision in the 1992 ISDA to the 2002 ISDA standard except the one provision of the 1992 ISDA they always liked — if the pedant is in question is from the Treasury department, that will be the longer grace period in the Failure to Pay; if she is from Credit, it absolutely won’t be.

You might well ask why anyone would be so bloody-minded, but then you might well ask why anybody watches films from the Fast and Furious franchise. Because they can.

Or, possibly, to preserve the slightly more generous grace periods for Failure to Pay (three days in the 1992 ISDA versus one in the 2002 ISDA) and Bankruptcy (thirty days in the 1992 ISDA versus 15 in the 2002 ISDA) in which case, you’d retrofit longer grace periods into the new version, wouldn’t you? But no).

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JC’s “nutshell” summary of the clause
Background reading and long-form essays
- The chicken-and-egg scenario with designating dates in the future and then ascertaining termination values

References