Attribution of Collateral to Loans - GMSLA Provision

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GMSLA Anatomy


In a Nutshell Clause 5.7:

5.7 Where Equivalent Collateral is delivered and the Parties have not agreed otherwise it will be attributed to the earliest outstanding Loan up to the point at which the Market Value of Collateral for that Loan equals its Required Collateral Value, and then to the next earliest outstanding Loan and so on.
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2010 GMSLA full text of Clause 5.7:

5.7 Where Equivalent Collateral is repaid or delivered (as the case may be) or further Collateral is provided by a Party under paragraph 5.6, the Parties shall agree to which Loan or Loans such repayment, delivery or further provision is to be attributed and failing agreement it shall be attributed, as determined by the Party making such repayment, delivery or further provision to the earliest outstanding Loan and, in the case of a repayment or delivery up to the point at which the Market Value of Collateral in respect of such Loan equals the Required Collateral Value in respect of such Loan, and then to the next earliest outstanding Loan up to the similar point and so on.
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"Attribution of Collateral to Loans"


5.7 in a Nutshell (GMSLA edition)

5.7 Where Equivalent Collateral is delivered and the Parties have not agreed otherwise it will be attributed to the earliest outstanding Loan up to the point at which the Market Value of Collateral for that Loan equals its Required Collateral Value, and then to the next earliest outstanding Loan and so on.

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This is a key provision in terms of the GMSLA Netting analysis because it provides a means for ascertaining the particular collateral that is attributable to a given Loan, which means that, should you decide to voluntarily terminate all Loans as a prelude to a close out, there is certainty as to what Collateral attaches to what loan, and you can therefore determine the Default Market Value and so on.