Merger Without Assumption - ISDA Provision

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium In a Nutshell™ Section 5(a)(viii): 5(a)(viii) Merger Without Assumption. The party (or a Credit Support Provider) merges with or transfers or all or substantially all its assets to another entity and:― (1) the resulting entity does not assume all the original party’s obligations under this Agreement (or Credit Support Document); or (2) the Credit Support Document does cover the resulting party’s obligations under this Agreement. view template 2002 ISDA full text of Section 5(a)(viii): 5(a)(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganises, reincorporates or reconstitutes into or as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganisation, reincorporation or reconstitution:― 5(a)(viii)(1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party; or 5(a)(viii)(2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. view template Click here for the text of Section 5(a)(viii) in the 1992 ISDA Index: Click ᐅ to expand: ISDA Navigation 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 • 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 • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 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 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

When a firm merges into, or is taken over by, another, some magical — or unexpected — things can happen. Not for nothing does the ISDA Master Agreement labour over the very description: that this might be a “consolidation, amalgamation, merger, transfer, reorganisation, reincorporation or reconstitution” — prolix even by ISDA’s lofty standards — should tell you something. Generations of lawyers have forged whole careers out of the manifold ways one can put companies together and take them apart again. Your correspondent is not one of them, and has little more to say about it, except that what happens to live contracts at the time of such chicanery will depend alot on just how the companies or their assets are being joined or torn assunder. If the contracts carry across — which in a plain merger, they ought to — all well and good

But in some cases the Transactions might not carry across. Perhaps the resulting entity has no power to transact swaps. Perhaps it is in a jurisdiction in which that cannot be enforced. Perhaps it just refuses to honour them. Merger Without Assumption addresses that contingency. This is the clause that would have been covered Section 5(a(ii)(2) repudiation, had the resulting entity accepted the contract at all in the first place. It can be triggered if:

• The resulting party repudiates any outstanding Transactions under the ISDA Master Agreement; or
• (in the case of a transfer of assets) a small rump of Transactions are left in the original entity, and not transferred at to the new entity. Now you would think this ought to be covered by Credit Event Upon Merger, wouldn't you, because if there were no deterioration in credit and the transferring entity was still around and hadn’t winked out of existence then,

And “all or substantially all” means?

There's not a lot of case law on it. Some say 90%. Some say 75%. Some people — your correspondent included — say “shoot me”.