Termination event
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See: Early Termination Events under the ISDA Master Agreement.
A termination event is a softer, gentler kind of event of default.
Popularised by those habitual splitters of hairs, ISDA lawyers, Early Termination Events are circumstances giving grounds to terminate an ISDA Master Agreement that do not speak to the moral character or unacceptable creditworthiness of the Affected Party (so labelled, as opposed to a ’Defaulting Party, who is such a turpitudinous wretch).
So an Illegality, a Force Majeure, a Tax Event, a Tax Event Upon Merger or a Credit Event Upon Merger — all these things speak to the motion of vengeful gods above our mortal heads; seismic changes beyond our gift or capacity to control, and for whose provenance we can’t roundly be blamed.
There again, Additional Termination Events — that category of other stuff thrown in for good measure by the credit department, and which are assured to foul up your negotiation for months — these are more naughty in their bearing, and “defaulty” — but they still roll like ATEs.
In most master trading agreements this kind of dancing on a pinhead is of little moment and is scarcely to be encouraged (but let a creative credit officer loose on it, and you’ll be amazed what she can come up with), but the term, volatility and net exposure one can generate under an ISDA Master Agreement make them a little special.
And we all like to feel a little special sometimes, don’t we?