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Template:M summ 2002 ISDA 5(a)(vi): Difference between revisions

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Template:M summ 2002 ISDA 5(a)(vi) (view source)

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===={{isdaprov|Specified Indebtedness}}====
===={{isdaprov|Specified Indebtedness}}====
{{isdaprov|Specified Indebtedness}} is generally any [[borrowed money|money borrowed]] from any third party (e.g. bank debt; [[deposits]], loan facilities etc.). Some parties will try to widen this: do your best to resist the temptation.  
{{isdaprov|Specified Indebtedness}} is generally any [[borrowed money|money borrowed]] from any third party (e.g. bank debt; [[deposits]], loan facilities etc.). Some parties will try to widen this: do your best to resist the temptation.  
===={{isdaprov|Threshold Amount}}====
 
The {{isdaprov|Threshold Amount}} is usually defined as a [[cash]] amount or a percentage of shareholder funds, or both, in which case — [[Trick for young players|schoolboy error]] hazard alert — be careful to say whether it is the greater or lesser of the two. It should be big: like, [[life-threateningly]] big — because the consequences of triggering a {{isdaprov|Cross Default}} are dire. Expect to see 2-3% of shareholder funds, or (for banks) sums in the order of hundreds of millions of dollars. For [[Hedge fund|fund]] counterparties the number could be a lot lower — like, ten million dollars or so — and, of course, will key off [[NAV]], not shareholder funds.
{{isda Threshold Amount summ|isdaprov}}
 
===[[Cross acceleration]]===
===[[Cross acceleration]]===
For those [[noble, fearless and brave]] folk who think {{isdaprov|Cross Default}} is a bit ''gauche''; a bit passé in these enlightened times of zero-threshold [[VM CSA]]s<ref>Your correspondent is one of them; the author of that terrible [[FT book about derivatives]] is not.</ref> but can’t quite persuade their [[credit department]] to abandon {{isdaprov|Cross Default}} altogether — a day I swear is coming, even if it is not yet here — one can quickly convert a dangerous {{isdaprov|Cross Default}} clause into a less nocuous (but still ''fairly'' nocuous, if you ask me — nocuous, and yet strangely pointless) [[cross acceleration]] clause — meaning your close-out right that is only available where the lender in question has ''actually'' [[accelerated]] its {{isdaprov|Specified Indebtedness}}, not just become able to accelerate it, with some fairly simple edits, which are discussed in tedious detail [[Cross Acceleration - ISDA Provision|here]].
For those [[noble, fearless and brave]] folk who think {{isdaprov|Cross Default}} is a bit ''gauche''; a bit passé in these enlightened times of zero-threshold [[VM CSA]]s<ref>Your correspondent is one of them; the author of that terrible [[FT book about derivatives]] is not.</ref> but can’t quite persuade their [[credit department]] to abandon {{isdaprov|Cross Default}} altogether — a day I swear is coming, even if it is not yet here — one can quickly convert a dangerous {{isdaprov|Cross Default}} clause into a less nocuous (but still ''fairly'' nocuous, if you ask me — nocuous, and yet strangely pointless) [[cross acceleration]] clause — meaning your close-out right that is only available where the lender in question has ''actually'' [[accelerated]] its {{isdaprov|Specified Indebtedness}}, not just become able to accelerate it, with some fairly simple edits, which are discussed in tedious detail [[Cross Acceleration - ISDA Provision|here]].
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