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Early redemption: Difference between revisions
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This creates a tension for the swap, especially where the Swap is [[out-of-the-money]] to the (innocent) Swap Counterparty, who might not ''want'' to terminate the swap and therefore book a [[mark-to-market]] loss. and as we know, a non-defaulting Party, when presented with an opportunity to designate an Early Termination Date, is not obliged to take it. This is less of a priority in our days of bilateral margining — but typically repackaging vehicles ''do not pay or receive margin''. | This creates a tension for the swap, especially where the Swap is [[out-of-the-money]] to the (innocent) Swap Counterparty, who might not ''want'' to terminate the swap and therefore book a [[mark-to-market]] loss. and as we know, a non-defaulting Party, when presented with an opportunity to designate an Early Termination Date, is not obliged to take it. This is less of a priority in our days of bilateral margining — but typically repackaging vehicles ''do not pay or receive margin''. | ||
In a repackaging, the counterparty must take it. | In a repackaging, the counterparty must take it. Older repack programmes hard-wired the termination in as a mandatory Additional Termination Event which the Swap Counterparty ''and'' Issuer (and its agents) are designated as Non-affected Parties and therefore entitled to designate an {{isdaprov|Early Termination Date}}. In modern ones, like SPIRE, the Issuer must notify the Noteholders and Trustee, and therefore must only terminate the Swap on the Trustee’s direction, which in turn entitles the Trustee to seek Noteholder indemnification before giving that instruction. We don’t understand that additional protection. | ||
What is the order of ceremonies under your hedging agreement if there is an unrelated early redemption event under the Notes? | What is the order of ceremonies under your hedging agreement if there is an unrelated early redemption event under the Notes? | ||