Failure to pay Collateral - GMSLA Provision

Commentary

10.1(a) in a Nutshell™ _{(GMSLA edition)}

10.1(a) Failure to Deliver: The failure, when required under Paragraph 5, of:

(i) either party to pay or repay Cash Collateral; or

(ii) the Borrower to deliver any other Collateral to the Lender;

Commentary

There are great tales of worthy fellows around the market trying to tweak this provision just in case, by oversight, it doesn't capture a failure to redeliver cash or collateral. As if life weren't trying enough as it is.

If you do need an articulate reason, you could venture that it comes down to the explanation below on the meaning of "equivalent" in the 2010 GMSLA. Since it the 2010 GMSLA is a outright title transfer agreement, and not really a loan, nothing is ever "repaid" or "redelivered". All obligations are primary obligations of payment and delivery.

If you need a more visceral argument (sometimes useful for more pointy-headed negotiators) try this one: "Get a life".

GMSLA Equivalence

Techy linguistic aside: Now here’s a funny thing. In the 2000 GMSLA, there were four defined terms relating to the Securities and Collateral that pass between the parties to a stock loan, all of them nouns:

But under the 2010 GMSLA, there are just three; two shorter nouns and an adjective:

This means you can move from the utterly tiring “Securities, Collateral, Equivalent Securities or Equivalent Collateral” which is fire-hosed throughout the 2000 GMSLA to the less offensive “Securities, Collateral or their Equivalents” in the 2010 GMSLA.^[1]

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