Cross Default - ISDA Provision: Difference between revisions

Cross Default - ISDA Provision (view source)

1,059 bytes added , 4 December 2015

no edit summary

82,891

edits

@@ Line 1: / Line 1: @@
 {{isdasnap|5(a)(vi)}}
+===The difference between the two formulations===
+====Measure of the Threshold====
+* 1992 formulation talks about an default under an agreement “in an aggregate amount not less that the ... Threshold Amount which results in the Specified Indebtedness becoming due and payable”,
+* 2002 formulation talks about default under agreements where the “aggregate principal amount” of the agreements is not less than the Threshold Amount.
+This is a seemingly innocuous change intended to clarify a drafting lapse that, for example, of you defaulted on a (relatively small) interest payment on a loan, which then made the whole loan repayable, you could only count the value of the defaulted interest payment to your threshold, when in reality the whole size of the loan is in jeopardy, and really should have been what was counted. It is innocuous, that is, unless you are cavalier enough to include derivatives in your definition of {{isdaprov|Specified Indebtedness}}. But if you do that, you've bought yourself a wild old ride anyway.
+===General===
 ''This article is specifically about the {{isdaprov|Cross Default}} provision in the {{isdama}}. See: [[cross default]] for a general discussion of the concept.