Events of Default (Early Termination Payments) - ISDA Provision: Difference between revisions
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{{isdaanat|6(e)(i)}} | {{isdaanat|6(e)(i)}} | ||
The effect of this is that all {{isdaprov|transaction}}s | The effect of this is that in closing out an ISDA, the first step is to terminate all {{isdaprov|transaction}}s, then figure out any {{isdaprov|Unpaid Amount}}s that were due but had not been paid at the time the {{isdaprov|Transaction}} terminated. The close out happens under Section {{isdaprov|6(e)}} of the {{isdama}} itself and the recourse is to a net sum. Betting does ''not'' happen under the {{isdaprov|Transactions}} — on the theory of the game there are no outstanding Transactions at the point of netting; just payables. | ||
Therefore, if your [[credit support]] (particularly [[guarantee]]s or [[LC|letters of credit]]) explicitly reference amounts due under specific {{isdaprov|Transaction}}s, you may lose any credit support at precisely the point you need it. | |||
Which would be a bummer. | |||
Further commentary on the [[Guarantee]] page. | |||
{{seealso}} | {{seealso}} | ||
*[[Guarantee]] | *[[Guarantee]] | ||
*{{isdaprov|Unpaid Amount}}s |
Revision as of 14:59, 15 October 2018
The effect of this is that in closing out an ISDA, the first step is to terminate all transactions, then figure out any Unpaid Amounts that were due but had not been paid at the time the Transaction terminated. The close out happens under Section 6(e) of the ISDA Master Agreement itself and the recourse is to a net sum. Betting does not happen under the Transactions — on the theory of the game there are no outstanding Transactions at the point of netting; just payables.
Therefore, if your credit support (particularly guarantees or letters of credit) explicitly reference amounts due under specific Transactions, you may lose any credit support at precisely the point you need it.
Which would be a bummer.
Further commentary on the Guarantee page.