Template:M comp disc GMSLA 11

There is little difference between the 2010 GMSLA and the 2018 Pledge GMSLA versions of Consequences of an Event of Default, as you can see more easily in this comparison of the nutshell versions. (There’s a comparison of the full provisions in the usual place in the panel). One thing you will notice is how utterly dismal is the drafting of the original provision. It was no small task to create nutshell versions — you can thank me later — but they boil down to not very much.

The differences that there are are significant, since the philosophical unpinning of what is going on is profoundly different, even if the commercial outcome is the same. Think VHS and Betamax. In a nutshell, under the 2018 Pledge GMSLA:

• Only the Borrower’s redelivery payments are accelerated, since by the theory of the game, the Lender never gets possession of the collateral and is not therefore in a position to redeliver it.
• There’s less fog and confusion because ICMA’s crack drafting squad™ in their wisdom removed Letters of Credit as a form of eligible Collateral from the 2018 Pledge GMSLA
• The reckoning of what is due under Paragraph 11.2(b) — setting off all sums owed by one party against all sums owed by the other — is less fraught, and will always be a net payable back to the Lender (because the Borrower never transferred title to the pledged Collateral in the first place)
• There is no concept in the2018 Pledge GMSLA of “Deliverable Securities” or “Receivable Securities”, seeing as there will not always be a receiver and a deliverer, so they don’t come into the frame for the reckoning of the Default Market Value in the same way.