Designated Event - ISDA Provision
2002 ISDA Master Agreement
A Jolly Contrarian owner’s manual™
Designated Event in all its glory
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These are mainly those merger type activities that no-one has ever managed to conveniently label including consolidation, amalgamation, merger, whole-business transfers, reorganisation, reincorporation or reconstitution, or taking control of the company, or changing its capital structure — including creating indebtedness...
But issuing indebtedness though?
Some learned commentators feel this is rather harsh, especially if you’re in the finance game, where raising indebtedness is part of what you do. Arguably, a bank deposit is a form of indebtedness. Loosely, so is any negative credit exposure. Likewise, the stricture applies to all Credit Support Providers and Specified Entities, so woe betide if one of those is a financial institution too.
The pragmatist might well say, “yeah, that’s how it reads, but no one would ever take the point right?” While it’s bracing to hear such an expression of trust and confidence in the bona fides of one’s fellow merchant in the markets, just “trusting one other” is not really the vibe of the international derivatives documentation community, and in any case if no one needs this clause, why write it in?
- The JC’s famous Nutshell™ summary of this clause
- “All or substantially all” ...
- But what exactly counts as “substantially”, and cui bono?
- And no, “Designated Event” does not count as a convenient descriptive label.