Template:M summ 2002 ISDA Applicable Close-out Rate
Truly from the I’m sorry I asked file — almost in the shoot me file. This whole game of pan-dimensional chess, with six different rates to apply in different circumstances, is all just to work out how to accrue interest on Unpaid Amounts and Early Termination Amounts when closing out. You get a strong sense that the pragmatists of ISDA’s crack drafting squad™ — if there are any — had well and truly tuned out and gone to the bar by the the ’squad got to this definition. Looking on the bright side, at least it doesn’t mention LIBOR.[1]
An easier way of thinking about it:
There is an Event of Default
If there is an Event of Default it will be the Default Rate or the Non-default Rate, depending on who is paying, whether it is an Unpaid Amount or an Early Termination Amount, before or after the Early Termination Amount payment date. That knocks out a lot of the complexity right there:
A Defaulting Party pays the Default Rate and a Non-defaulting Party pays the Non-default Rate. In all circumstances.
There is not an Event of Default
This includes Termination Events and quasi Termination Events — things like Force Majeure Events and Illegality where there is a Waiting Period or a deferral of some kind. Here it will be
- Until the day the Early Termination Amount is due (factoring in any Waiting Period), the Applicable Deferral Rate, and after that point the Termination Rate.
Look, I said easier, not easy. You do sense that it could have been quite a lot less convoluted even than this, don’t you.
