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Grace period (view source)

Revision as of 14:24, 10 April 2020

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An item liable to give a credit officer hot flushes. Most frequently seen in the context of a [[failure to pay]] or a [[bankruptcy]] [[event of default]] in a financing or trading document.
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[[File:Praying Hands - Albrecht Durer.png|450px|frameless|center]]
}}A [[grace period]] — being the difference between an [[event of default]] and a [[potential event of default]] — is the sort of thing that is liable to give a [[credit officer]] hot flushes. Given away years before, in a weak moment during a sterile {{t|negotiation}}, when the sap finally rises and our [[Credit officer|credit fellow]] is fumbling in his trousers for his termination triggers, it will flare up and spoil the moment.  


It gets these people so excited because, just when they're ready to hit the kill switch, their lawyers tell them they have to wait. It's like coitus interruptus. A credit office who's hot to trot is quite a sight to behold. Just don't get between him and his cross default trigger finger.
[[Grace period]]s are usually found in buried into [[failure to pay]] or [[bankruptcy]] [[events of default]] — or, stealthily, in the ''notices'' clause (see below). Your counterparty has [[Failure to pay|failed to pay]] on a due date, or a petition has been presented, but the {{t|contract}} stipulates the counterparty has a period to cure its failure or discharge the petition. Until that period has elapsed you must keep your agitated [[credit officer]] under a cold shower. Until then, you have a [[potential event of default]] — a sort of murky netherworld of counterparty turpitude where oxygen is in short supply, skies darken and debtors start to go blue — and this might afford you some comfort (under [[representations]] and [[warranties]]) but it won’t ''yet'' permit your [[credit]] guy to pull his, ah, trigger.


A failure to pay where a grace period hasn't expired may amount to a potential event of default - a sort of murky netherworld of counterparty turpitude where oxygen is in short supply, skies darken and debtors start to go blue.
{{Grace periods and time of essence}}
 
===Backdoor [[grace period]]s ... in the ''notices'' clause===
Places to look for more focused information therefore:
{{Notices complexity option}}
* ISDA {{isdaprov|failure to pay}} and {{isdaprov|bankruptcy}}
{{sa}}
*{{isdaprov|Failure to pay}} and {{isdaprov|Bankruptcy}} under the {{isdama}}
{{ref}}
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