Template:Isda Potential Event of Default summ

A {{{{{1}}}|Potential Event of Default}} is a {{{{{1}}}|Failure to Pay or Deliver}}, {{{{{1}}}|Breach of Agreement}} (or other {{{{{1}}}|Event of Default}}) with an unexpired grace period, or where the grace period has expired but the {{{{{1}}}|Non-defaulting Party}} hasn’t (yet) given a notice of default actually accelerating the default into an actual {{{{{1}}}|Event of Default}}.

That means, 2(a)(iii) defenders, that any formal breach of the ISDA Master Agreement, if notified by the {{{{{1}}}|Non-defaulting Party}}, renders the Section {{{{{1}}}|2(a)(iii)}} conditions precedent unfulfilled, and means you can suspend performance of your obligations under all outstanding {{{{{1}}}|Transaction}}s. I don’t make the rules, folks.

Actually, courtesy of that parenthetical “, or both,” it is worse even than that, though we think common courtesy (or at any rate, sense} would intervene to prevent non-notified formal breaches being acted upon. But not the literal terms of the ISDA: A formal breach — any non-compliance with its terms more grievous than a failure to provide tax certificates (that is specifically carved out) on commission suspends the other Party’s obligations until cured.

This is truly a custom more honoured in the breach than th’observance, and just as well: if ISDAs locked up every time a party was late with its annual Sox attestation only half the world’s swap financing would ever get paid.