Manufactured payments in respect of Non-Cash Collateral - GMSLA Provision
2010 Global Master Securities Lending Agreement
Clause 6.3 in a Nutshell™
Use at your own risk, campers!
Full text of Clause 6.3
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Template:M comp disc GMSLA 6.3
There is quite a lot of hedging around with conditionals — “the amount the Lender would have received had it held...” — that looks quite unnecessary — and truthfully, is — but is designed to cater for the details freak/paranoid weirdos in the legal department, because (a) being a title transfer agreement, the Lender is not obliged to, and may well not, hold on to any collateral it has been delivered, and thus may not be entitled to interest on the Collateral at all, and (b) the Lender is only obliged to manufacture the payment if the Collateral Issuer actually makes the payment, and not if it is obliged to make the payment, but then fails to (because it has blown up, for example.
So there's a sort of four way matrix here to determine whether a Lender has to manufacture a payment.
|Manufactured income matrix||Lender held Collateral||Lender reused Collateral|
|Issuer made payment||Yes||Yes|
|Issuer failed payment||No||No|
Snafu under the 2000 GMSLA
Note this is all somewhat complicated under the 2000 GMSLA because the drafting committee rather muffed their job. See Clause 6.1 re Manufactured Payments.