Template:M gen 1992 ISDA 5(a)(vi): Difference between revisions

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==={{isdaprov|Specified Indebtedness}}===
{{specified indebtedness capsule|isdaprov}}
===Measure of the {{isdaprov|Threshold Amount}}===
*'''{{1992ma}}''': This contemplates default “in an aggregate '''amount'''” exceeding the {{isdaprov|Threshold Amount}} which would justify early termination of the {{isdaprov|Specified Indebtedness}}: that is to say the value of the failed payment, and not the whole principal amount of the {{isdaprov|Specified Indebtedness}} it was owed under, contributes to the {{isdaprov|Threshold Amount}}, ;
*'''{{2002ma}}''': This contemplates an [[event of default]] under agreements whose “'''aggregate principal amount'''” is greater than the Threshold Amount: that is to say it is the ''whole principal amount'' of the agreement which is picked up, not just the amount of the payment.


This change, we speculate, is meant to fix a howler of a drafting lapse from {{icds}}:
*It can be triggered by any [[event of default]], not just a payment default (i.e. the {{1992ma}} requirement for “an {{isdaprov|Event of Default}} ... ''in an amount equal to...''” impliedly limits the clause to ''payment'' defaults only since other defaults aren't “in an amount”...);
*It captures the whole value of the {{isdaprov|Specified Indebtedness}}, not just the value of the default (if it even ''is'' a payment capable of being valued) itself.
For example: if you defaulted on a small interest payment on your {{isdaprov|Specified Indebtedness}} which made your whole loan repayable, under the {{1992ma}} you could only count the value of that missed interest payment to your {{isdaprov|Threshold Amount}}. But the whole loan is at risk of being accelerated — so this is a  much more significant credit deterioration than is implied by the missed payment.
It is innocuous, that is, unless you are cavalier enough to include ''derivatives or other payments which are not debt-like'' in your {{isdaprov|Specified Indebtedness}}. But if you do that, you've bought yourself a wild old ride anyway.
Don't say you weren't warned.

Latest revision as of 20:57, 26 December 2023

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