2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
Deferral of Payments in a Nutshell™
|
The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here.
|
Original text
5(d) Deferral of Payments and Deliveries During Waiting Period. If an Illegality or a Force Majeure Event has occurred and is continuing with respect to a Transaction, each payment or delivery which would otherwise be required to be made under that Transaction will be deferred to, and will not be due until:―
- 5(d)(i) the first Local Business Day or, in the case of a delivery, the first Local Delivery Day (or the first day that would have been a Local Business Day or Local Delivery Day, as appropriate, but for the occurrence of the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event) following the end of any applicable Waiting Period in respect of that Illegality or Force Majeure Event, as the case may be; or
- 5(d)(ii) if earlier, the date on which the event or circumstance constituting or giving rise to that Illegality or Force Majeure Event ceases to exist or, if such date is not a Local Business Day or, in the case of a delivery, a Local Delivery Day, the first following day that is a Local Business Day or Local Delivery Day, as appropriate.
“Applicable Deferral Rate” means:—
- (a) for the purpose of Section 9(h)(i)(3)(A), the rate certified by the relevant payer to be a rate offered to the payer by a major bank in a relevant interbank market for overnight deposits in the applicable currency, such bank to be selected in good faith by the payer for the purpose of obtaining a representative rate that will reasonably reflect conditions prevailing at the time in that relevant market;
- (b) for purposes of Section 9(h)(i)(3)(B) and clause (a)(iii) of the definition of Applicable Close-out Rate, the rate certified by the relevant payer to be a rate offered to prime banks by a major bank in a relevant interbank market for overnight deposits in the applicable currency, such bank to be selected in good faith by the payer after consultation with the other party, if practicable, for the purpose of obtaining a representative rate that will reasonably reflect conditions prevailing at the time in that relevant market; and
- (c) for purposes of Section 9(h)(i)(3)(C) and clauses (a)(iv), (b)(i)(3) and (b)(ii)(l) of the definition of Applicable Close-out Rate, a rate equal to the arithmetic mean of the rate determined pursuant to clause (a) above and a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount.
|
Resources and Navigation
Index: Click ᐅ to expand:
|
|
Comparisons
Section 5(d) has no equivalent in the 1987 ISDA or the 1992 ISDA, seeing as neither contains a Force Majeure Event at all, and the earlier versions’ conception of Illegality is far less — how shall we say? — sophisticated than the one in the 2002 ISDA.
So if you clicked on the 1987 or 1992 version, you will have been sent back here. Sorry.
Basics
Upon an Illegality or Force Majeure Event, payments and deliveries are deferred until the earlier of (a) the expiry of any Waiting Period; and (b) the date on which the Illegality or Force Majeure Event is cured.
If you want to find out the Applicable Close-out Rate, chances are you will bump into one of these deferred payments rates. You might think, and we might agree with you, that ISDA’s crack drafting squad™ was over-thinking a remote contingency for recovering more money from a counterparty that probably doesn’t have the money to pay it in the first place. Okay, okay, it might do upon a Force Majeure Event or an Illegality. But not a 2(a)(iii) suspension.
ISDA’s crack drafting squad™. Never knowingly unfussed™.
Premium content
Here the free bit runs out. Subscribers click 👉 here. New readers sign up 👉 here and, for ½ a weekly 🍺 go full ninja about all these juicy topics👇
|
See also
References