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“'''Borrowed money'''” - also known as [[indebtedness]] - is a term of art used in financial contracts. It is a key part of the definition of {{isdaprov|Specified Indebtedness}} in the {{isdama}}, which in turn is a key part of the definition of {{isdaprov|Cross Default}}. | |||
Borrowed Money is the main difference in scope between {{isdaprov|Cross Default}} and {{isdaprov|Default under Specified Transaction}} - the former includes it, the latter (unless you monkey around with your definition) does not. | Borrowed Money is the main difference in scope between {{isdaprov|Cross Default}} and {{isdaprov|Default under Specified Transaction}} - the former includes it, the latter (unless you monkey around with your definition) does not. | ||
==Scope: does borrowed money extend to | ==Scope: does borrowed money extend to {{T|Stock loan}} and {{t|repo}} obligations?== | ||
Borrowed money is not generally defined. You know it when you see it. Quoth that sage old ''eminence gris'' Simon Firth, in his book [http://www.amazon.co.uk/Derivatives-Law-Practice-Simon-Firth/dp/0421830204 Derivatives Law and Practice]: | Borrowed money is not generally defined. You know it when you see it. Quoth that sage old ''eminence gris'' Simon Firth, in his book [http://www.amazon.co.uk/Derivatives-Law-Practice-Simon-Firth/dp/0421830204 Derivatives Law and Practice]: | ||
{{box| | {{box|“'''Borrowed money'''” is not defined but it means money which has been paid on the basis that it is to be repaid at a future date. It therefore excludes amounts that are due to ordinary trade creditors and financing arrangements (such as [[repo]]s and the discounting of bills of exchange).}} | ||
Mr Firth cites ''Transport & General Credit Corp. v Morgan'' [1939] CH 531 as authority for this point. It is important that repo and stock lending is excluded from the definition, because otherwise the {{isdaprov|Cross Default}} provisions of an ISDA may be triggered by a failure under a repo. Also this nugget, per Lord Devlin in ''Chow Yoong Hong v Choong Fah Rubber Manufactory'' [1962] AC 209: | Mr Firth cites ''Transport & General Credit Corp. v Morgan'' [1939] CH 531 as authority for this point. It is important that repo and stock lending is excluded from the definition, because otherwise the {{isdaprov|Cross Default}} provisions of an ISDA may be triggered by a failure under a repo. Also this nugget, per Lord Devlin in ''Chow Yoong Hong v Choong Fah Rubber Manufactory'' [1962] AC 209: |