Template:M summ Credit Derivatives 4.5
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Note the contraction in scope brought about by the narrowly-tailored credit event annex.
Differences with Section 5(a)(i)
- Threshold: There is a Payment Obligation meaning that the payment has to exceed a threshold. Presumably one indicative of the Reference Entity’s general financial parlousness, but the parties are free to set it where they like. In this regard redolent of Cross Default.
- Agregation: Also like Cross Default, it contemplates an aggregation of multiple failures perhaps under several Obligations. Depending on how constrained your Obligations are — usually more so than Specified ilIndebtedness, which is usually borrowed money and may even be (unwisely, but still) widened from that.