Cross Default - ISDA Provision: Difference between revisions

Cross Default - ISDA Provision (view source)

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-{{fullanatopen|isda|{{nuts|2002 ISDA|Cross Default}}}}{{fullanat2|isda|5(a)(vi)|2002|5(a)(vi)|1992}}{{DUST and Cross Default Comparison}}
+{{fullanatopen|isda|{{nuts|2002 ISDA|Cross Default}}}}{{fullanat2|isda|5(a)(vi)|2002|5(a)(vi)|1992}}
+===General===
+''This article is specifically about the {{isdaprov|Cross Default}} provision in the {{isdama}}. See: [[cross default]] for a general discussion of the concept.
+Under the {{isdama}}, if the cross default applies, the occurrence with respect to a party of a payment default under, or other circumstance that could result in the early termination of, {{isdaprov|Specified Indebtedness}} above an agreed {{isdaprov|Threshold}} will give the other party the right to terminate transactions under the ISDA Master.
+Specified Indebtedness is usually defined to any claim against a party (by any third party) for [[borrowed money]] (e.g. bank debt; [[deposits]] etc.) and the {{isdaprov|Threshold}} which triggers it is usually defined as a cash amount or a percentage of shareholder funds.
+If the cross default applies, the terms of any {{isdaprov|Specified Indebtedness}} owed by the counterparty above the {{isdaprov|Threshold Amount}} are, in effect, indirectly incorporated into the {{isdama}}. For example, the breach of a financial covenant in a qualifying loan facility, '''even if not acted upon by the lender of that facility'''  would give a swap counterparty the right to terminate transactions under the ISDA Master even though the ISDA Master itself contains no financial covenants.
+===Cross Aggregation===
+The {{2002ma}} updates the {{1992ma}} cross-default provision so that if the outstanding amount under the 2 limbs of cross-default added together breach the {{isdaprov|Threshold Amount|Threshold Amount}}, then that will trigger cross default. Normally, under the {{1992ma}} , cross-default is only triggered if an amount under one or the other limbs is breached.
+As per the above, the two limbs are:
+*a default or similar event under financial agreements or instruments that has resulted in indebtedness becoming capable of being accelerated and terminated by a Non-defaulting Party
+*a failure to make any payments on their due date under such agreements or instruments after notice or the expiry of a grace period.
+{{DUST and Cross Default Comparison}}
 ===The difference between the two formulations===
 ====Measure of the Threshold====
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 Rather uniquely attention-sapping drafting all round.
-===General===
-''This article is specifically about the {{isdaprov|Cross Default}} provision in the {{isdama}}. See: [[cross default]] for a general discussion of the concept.
-Under the {{isdama}}, if the cross default applies, the occurrence with respect to a party of a payment default under, or other circumstance that could result in the early termination of, {{isdaprov|Specified Indebtedness}} above an agreed {{isdaprov|Threshold}} will give the other party the right to terminate transactions under the ISDA Master.
-Specified Indebtedness is usually defined to any claim against a party (by any third party) for [[borrowed money]] (e.g. bank debt; [[deposits]] etc.) and the {{isdaprov|Threshold}} which triggers it is usually defined as a cash amount or a percentage of shareholder funds.
-If the cross default applies, the terms of any {{isdaprov|Specified Indebtedness}} owed by the counterparty above the {{isdaprov|Threshold Amount}} are, in effect, indirectly incorporated into the {{isdama}}. For example, the breach of a financial covenant in a qualifying loan facility, '''even if not acted upon by the lender of that facility'''  would give a swap counterparty the right to terminate transactions under the ISDA Master even though the ISDA Master itself contains no financial covenants.
-===Cross Aggregation===
-The {{2002ma}} updates the {{1992ma}} cross-default provision so that if the outstanding amount under the 2 limbs of cross-default added together breach the {{isdaprov|Threshold Amount|Threshold Amount}}, then that will trigger cross default. Normally, under the {{1992ma}} , cross-default is only triggered if an amount under one or the other limbs is breached.
-As per the above, the two limbs are:
-*a default or similar event under financial agreements or instruments that has resulted in indebtedness becoming capable of being accelerated and terminated by a Non-defaulting Party
-*a failure to make any payments on their due date under such agreements or instruments after notice or the expiry of a grace period.
 {{ref}}