Borrowed money

"Borrowed money" is a term of art used in financial contracts, notably appearing as a key part of the definition of Specified Indebtedness in the ISDA Master Agreement.

Scope of "borrowed money"

Quoth Simon Firth, in his book Derivatives Law and Practice:

"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 repos
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 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:

The task of the court in such cases is clear. It must first look at the nature of the transaction which the parties
have agreed. If in form it is not a loan, it is not to the point to say that its object was to raise money for one of
them or that the parties could have produced the same result more conveniently by borrowing and lending money. But if
the court comes to the conclusion that the form of the transaction is only a sham and that what the parties really
agreed upon was a loan which they disguised, for example, as a discounting operation, then the court will call it by
its real name and act accordingly.

• Cross Default
• Specified Indebtedness