Talk:Consequences of an Event of Default - GMSLA Provision: Difference between revisions

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Nutshell 2018
Nutshell 2010


11 Consequences of an Event of Default
11 Consequences of an Event of Default
11.1 If an Event of Default occurs to either Party:
11.1 If an Event of Default happens to either Party:
11.2 Acceleration: Borrower’s obligations under the Agreement will be accelerated so as to require immediate performance at the time of the Event of Default (the Termination Date). Performance will happen as follows.
11.2 Acceleration: The Parties’ obligations will be accelerated as at the Event of Default (the Termination Date) as follows:
11.2(a) The Non-Defaulting Party will determine the Default Market Value of the Borrower’s delivery and payment obligations as at the Termination Date as set out in paragraph 11.4.
(a) The Non-Defaulting Party will determine the Default Market Value of all amounts (and securities) due by each Party under paragraph 11.4 as at the Termination Date.
11.2(b) Using those Default Market Value, [the Non-Defaulting Party will determine and notify][1]what each Party owes under this Agreement as at the Termination Date, converting amounts into the Base Currency where necessary, will set those sums off against each other and Party owing the greater amount must pay the balance on the Business Day after notification.
(b) Using those values, [the Non-Defaulting Party will determine and notify][1]what each Party owes as at the Termination Date, converting into the Base Currency at the Spot Rate where necessary, and will set those sums off against each other. The Party owing the greater amount must pay the difference on the Business Day after notification.
11.3 Determining the Default Market Value: The Non-Defaulting Party will determine the Default Market Value of any Equivalent Securities according to paragraphs 11.4 to 11.6, where the Appropriate Market is the most appropriate market for Securities of that description, as determined by the Non-Defaulting Party, the Default Valuation Time means the Close of Business in the Appropriate Market on the fifth dealing day after the Termination Date, Net Value means the Non-Defaulting Party’s reasonable opinion of their fair Market Value less (where Lender is the Defaulting Party) or plus (where Borrower is the Defaulting Party), all reasonable costs of any transaction needed under paragraph 11.4 or 11.5 (Transaction Costs).
(c) and (d) [(d) being the vice-versa] If that balance is payable by a Party who had delivered a Letter of Credit to the other Party the other Party must draw on the Letter of Credit to settle the amount due and then deliver it for cancellation.
11.3 The Default Market Value of a Letter of Credit will be zero. For any Equivalent Securities or any other Equivalent Non-Cash Collateral it will be determined under paragraphs 11.4 to 11.6 below, where:
Appropriate Market is the most appropriate market for any securities determined by the Non-Defaulting Party;
Default Valuation Time means the Close of Business in the Appropriate Market on the fifth dealing day after the Event of Default (or where Automatic Early Termination applies, the day the Non Defaulting Party became aware of it);
Deliverable Securities means Equivalent Securities or Equivalent Non-Cash Collateral to be delivered by the Defaulting Party;
Net Value of any securities means the Non-Defaulting Party’s reasonable opinion of their fair Market Value less (where Lender is the Defaulting Party) or plus (where Borrower is the Defaulting Party), all reasonable costs of any transaction needed under paragraph 11.4 or 11.5 (Transaction Costs); and
Receivable Securities means Equivalent Securities or Equivalent Non-Cash Collateral to be delivered to the Defaulting Party.
11.4 Transactions and quotes: If, between the Termination Date and the Default Valuation Time:
11.4 Transactions and quotes: If, between the Termination Date and the Default Valuation Time:
11.4(a) as Non-Defaulting Party, the Borrower has sold or the Lender has purchased, fungible Equivalent Securities it may treat as the Default Market Value:
(a) Actual sale or purchase: the Non-Defaulting Party has bought or sold securities equivalent to those it owes or is owed by the Defaulting Party it may treat the Default Market Value as the net sale proceeds or aggregate purchase cost of the relevant securities. Were the securities sold or purchased are not in identical in amount to the Equivalent Securities, Non-Defaulting Party may in good faith pro rate those values to determine the necessary Default Market Value.
11.4(a)(i) in the case of a sale, the net proceeds of sale after deducting all Transaction Costs;
(b) Market quotes: the Non-Defaulting Party has received offer quotations for securities it is owed by the Defaulting Party; or bid quotations for securities it owes the Defaulting Party from at least two regular participants in the Appropriate Market in what it determines to be a commercially reasonable size, it may treat as the Default Market Value the arithmetic mean of the quoted prices as reasonably adjusted to account for for accrued but unpaid interest and Transaction Costs.
11.4(a)(ii) in the case of a purchase, the aggregate cost of such purchase, including Transaction Costs;
11.5 Where there’s no commercially reasonable value: If, having tried in good faith, the Non-Defaulting Party has not been able to sell nor purchase Securities under paragraph 11.4(a) or obtain quotations under paragraph 11.4(b), or it considers the quotations it did obtain are not commercially reasonable, it may determine the Net Value of the Equivalent Securities or Collateral and treat that as their Default Market Value.
provided that, where the Securities sold or purchased are not in identical in amount to the Equivalent Securities, Non-Defaulting Party may in good faith pro rate those values to determine the necessary Default Market Value.
11.6 If the Non-Defaulting Party has not determined a Default Market Value under 11.4, it will equal the Net Value of the securities in question at the Default Valuation Time. However, if the Non-Defaulting Party determines it is not practicable to calculate a commercially reasonable Net Value at that time, the Default Market Value will be the Net Value it determines as soon as reasonably practicable after the Default Valuation Time.
11.4(b) the Non-Defaulting Party has received bids (where it is Borrower) or offers (where it is Lender) for fungible Equivalent Securities from at least two regular participants in the Appropriate Market in what it determines to be a commercially reasonable size, it may treat as the Default Market Value the arithmetic mean of the quoted prices as reasonably adjusted to account for for accrued but unpaid interest and Transaction Costs.
11.7 Costs and expenses following an Event of Default: The Defaulting Party must pay the Non-Defaulting Party’s reasonable professional expenses in connection with the Event of Default plus interest at the rate agreed by the Parties or failing that, the overnight LIBOR rate as at 11.00 a.m., London time. Interest will accrue and compound daily.
11.5 Where there’s no commercially reasonable value: If, having tried in good faith, the Non-Defaulting Party has managed neither to sell nor purchase Securities under paragraph 11.4(a), nor obtain quotations under paragraph 11.4(b), or it has determined that the quotations are not commercially reasonable, it may determine the Net Value of the Equivalent Securities treat that Net Value as their Default Market Value.
11.8 Set-off Any amount payable to one Party by the other under 11.2(b) may, at the Non Defaulting Party’s option, be set off against any amount payable the other way under any other agreement between the Parties. The Non Defaulting Party may estimate any unascertained obligation but must account for any difference once finally ascertained. This paragraph does not create a security interest, or prejudice any other rights either party may have.
11.6 If the Non-Defaulting Party has not determined the Default Market Value under paragraph 11.4, it will equal the Net Value of the Equivalent Securities at the Default Valuation Time unless it is not commercially reasonable to determine such Net Value at that time, in which case it will equal the Net Value that the Non-Defaulting Party determines as soon as reasonably practicable after the Default Valuation Time.
11.7 Other costs, expenses and interest payable in consequence of an Event of Default: The Defaulting Party must pay the Non-Defaulting Party all its reasonable professional expenses in connection with the Event of Default with interest at the rate specified in paragraph 10 of the Schedule or, if not specified, the overnight LIBOR rate as at 11.00 a.m., London time. Interest will accrue daily on a compound basis.
11.8 Set-off: The Non-Defaulting Party may set off any amount due under paragraph 11.2(b) against any amount payable the other way under any other agreement between the Parties and for that purpose may in good faith estimate any unascertained obligations but must account for any difference when the obligation is finally ascertained. This paragraph does not create a security interest and operates in addition to and without affecting any other right of set-off, combination of accounts, lien or other right to which any Party may be entitled.

Latest revision as of 09:50, 24 June 2020

Nutshell 2010

11 Consequences of an Event of Default 11.1 If an Event of Default happens to either Party: 11.2 Acceleration: The Parties’ obligations will be accelerated as at the Event of Default (the Termination Date) as follows: (a) The Non-Defaulting Party will determine the Default Market Value of all amounts (and securities) due by each Party under paragraph 11.4 as at the Termination Date. (b) Using those values, [the Non-Defaulting Party will determine and notify][1]what each Party owes as at the Termination Date, converting into the Base Currency at the Spot Rate where necessary, and will set those sums off against each other. The Party owing the greater amount must pay the difference on the Business Day after notification. (c) and (d) [(d) being the vice-versa] If that balance is payable by a Party who had delivered a Letter of Credit to the other Party the other Party must draw on the Letter of Credit to settle the amount due and then deliver it for cancellation. 11.3 The Default Market Value of a Letter of Credit will be zero. For any Equivalent Securities or any other Equivalent Non-Cash Collateral it will be determined under paragraphs 11.4 to 11.6 below, where: Appropriate Market is the most appropriate market for any securities determined by the Non-Defaulting Party; Default Valuation Time means the Close of Business in the Appropriate Market on the fifth dealing day after the Event of Default (or where Automatic Early Termination applies, the day the Non Defaulting Party became aware of it); Deliverable Securities means Equivalent Securities or Equivalent Non-Cash Collateral to be delivered by the Defaulting Party; Net Value of any securities means the Non-Defaulting Party’s reasonable opinion of their fair Market Value less (where Lender is the Defaulting Party) or plus (where Borrower is the Defaulting Party), all reasonable costs of any transaction needed under paragraph 11.4 or 11.5 (Transaction Costs); and Receivable Securities means Equivalent Securities or Equivalent Non-Cash Collateral to be delivered to the Defaulting Party. 11.4 Transactions and quotes: If, between the Termination Date and the Default Valuation Time: (a) Actual sale or purchase: the Non-Defaulting Party has bought or sold securities equivalent to those it owes or is owed by the Defaulting Party it may treat the Default Market Value as the net sale proceeds or aggregate purchase cost of the relevant securities. Were the securities sold or purchased are not in identical in amount to the Equivalent Securities, Non-Defaulting Party may in good faith pro rate those values to determine the necessary Default Market Value. (b) Market quotes: the Non-Defaulting Party has received offer quotations for securities it is owed by the Defaulting Party; or bid quotations for securities it owes the Defaulting Party from at least two regular participants in the Appropriate Market in what it determines to be a commercially reasonable size, it may treat as the Default Market Value the arithmetic mean of the quoted prices as reasonably adjusted to account for for accrued but unpaid interest and Transaction Costs. 11.5 Where there’s no commercially reasonable value: If, having tried in good faith, the Non-Defaulting Party has not been able to sell nor purchase Securities under paragraph 11.4(a) or obtain quotations under paragraph 11.4(b), or it considers the quotations it did obtain are not commercially reasonable, it may determine the Net Value of the Equivalent Securities or Collateral and treat that as their Default Market Value. 11.6 If the Non-Defaulting Party has not determined a Default Market Value under 11.4, it will equal the Net Value of the securities in question at the Default Valuation Time. However, if the Non-Defaulting Party determines it is not practicable to calculate a commercially reasonable Net Value at that time, the Default Market Value will be the Net Value it determines as soon as reasonably practicable after the Default Valuation Time. 11.7 Costs and expenses following an Event of Default: The Defaulting Party must pay the Non-Defaulting Party’s reasonable professional expenses in connection with the Event of Default plus interest at the rate agreed by the Parties or failing that, the overnight LIBOR rate as at 11.00 a.m., London time. Interest will accrue and compound daily. 11.8 Set-off Any amount payable to one Party by the other under 11.2(b) may, at the Non Defaulting Party’s option, be set off against any amount payable the other way under any other agreement between the Parties. The Non Defaulting Party may estimate any unascertained obligation but must account for any difference once finally ascertained. This paragraph does not create a security interest, or prejudice any other rights either party may have.

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