Failure by either Party to deliver - GMSLA Provision
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GMSLA Anatomy™
then the Transferor agrees to pay within one Business Day of a demand from the Transferee and hold harmless the Transferee with respect to all reasonable costs and expenses listed in sub paragraphs (a) and (b) above properly incurred which arise directly from such failure other than (i) such costs and expenses which arise from the negligence or wilful default of the Transferee and (ii) any indirect or consequential losses.
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Mini close-out
See the discussion on mini close-out under the 2010 GMSLA (and the 1995 OSLA for that matter) and also the general discussion with regard to this clause in its wider context at clause 9.
Note also the clear exclusion of indirect and consequential losses, as well as losses to which the Transferee is contributorily negligent. If you are thinking I just made up the adjective “contributorily”, and were about to conclude I’m maybe a bit reckless[1]* you might be interested to know it is actually a word.
Default interest
Are references here to interest to, like default interest under Clause 11.7? And if so are we in a world of LIBOR remediation?
Well, this old fellow’s opinion is no. Clause 11.7 of the 2010 GMSLA is specific to costs following actual close out on an Event of Default (a Buy-in isn’t an Event of Default), and only on professional expenses. The vibe here is you reimburse me my actual costs. So, the actual interest cost I incurred in funding the securities I bought in, rather than some abstract derivative notion of my costs represented by a benchmark.
Replacement costs and ISDA hedging language
Does it make sense to replace this clause with some convoluted shtick about the costs of Replacement Transactions or otherwise hedging the innocent party’s exposure? To determine follow this flow chart:
See also
References
- ↑ I expect careful attorneys to be rolling around on the floor laughing at this bon mot.