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No event of default or potential event of default: Difference between revisions
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No event of default or potential event of default (view source)
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{{repanat|No default or potential event of default}} | {{repanat|No default or potential event of default}} | ||
Can you understand the rationale for this representation: Sure. Does it make any practical sense? It does not. A [[No event of default or potential event of default - Representation|No EOD rep]] is a classic [[loo paper rep]]: soft, durable, comfy, absorbent — super cute when a wee Labrador pub grabs one end of the streamer and charges round your Italian sunken garden with it — but as a [[credit mitigant]] or a genuine contractual protection, only good for wiping your behind on. | |||
Firstly, you are asking someone — on pain of them being found in [[Fundamental breach|fundamental breach of contract]] — to swear to you they are not already in fundamental breach of contract. Now how much credibility can you place one someone in that case? How much comfort can you genuinely draw from that specific promise? Wouldn't it be better if your [[credit]] team did some cursory due diligence to establish whether there are any grounds to think your counterparty is in fundamental breach of contract? Presuming that no such information is available — folks tend not to publicise their own defaults on private contracts, after all, the real question here is “Do I trust my counterparty?” And to that question, any answer provided by exactly the person whose trustworthiness your equiry is designed to test, carries exactly no informational value. | |||
Secondly, let’s say it turns out your Counterparty was lying; there was an extant or pending [[event of default]]. Now what are you going to do? Bleed on him? | |||
===“... or would occur as a result of entering into this agreement”=== | |||
A curious confection, you might think: ''what sort of [[event of default]] could a fellow trigger merely by entering into an {{isdama}} with me?'' Well, remember the [[ISDA]]’s lineage. It was crafted, before the alliance of men and elves, by the [[Children of the Forest]]. They were a species of pre-derivative, banking people. It is possible they had in mind the sort of [[restrictive covenant]]s a banker might demand of a borrower with a look of softness about its credit standing: perhaps a promise not to create indebtedness | |||