Section 12, point a) of the ISDA executive contract defines the methods of publication. In accordance with the original version of the 1987 agreement, notification may be made in one of the following ways: (i) by written and personal notification, (ii) by certification or recommended letter (air mail if abroad) or equivalent (requested with confirmation of return), (iii) per-Hefling or (iv) by telex (with response received). When a loan is secured by the parties, many commercial loan contracts include counter-issues that may include security obligations or other non-payment-related default events under a guarantee contract. If the maintenance of a security contract is a requirement in the context of the associated loan, it is possible that the termination of the security contract may also result in a default under the loan contract. (Back to the top) Yes, yes. If your ISDA agreement is terminated, it may trigger defaults in other derivatives and securities agreements that are separate from the terminated ISDA agreement and depend on any standard provision in these separate agreements. The relevant agreements can be concluded between the parties to the terminated ISDA agreement, as well as with all credit support service providers and all entities listed in the terminated ISDA agreement. Has Chatham undergone any changes to the provisions or language of the derivative agreements as a result of COVID-19? Is there currently a recommended language? Our lender has us defer certain payments as part of the loan agreement. What is the impact on our swap? Standard non-payment is a delay event under the 2002 ISDA Master Contract, subject to an additional one-day delay after non-payment was made by a non-late payment party. If such a default occurs, the non-failing party can no longer make payments to the late party and has the right to set an early termination date. However, if non-payment or delivery occurs as a result of complications related to COVID-19, the contracting party must first consider whether the force majeure standard can apply to such an event and what types of additional delays and remedies are included in the contracts involved.
Under the 2002 isda master contract, non-payment due to a case of force majeure would trigger a waiting period of eight local working days and, if this non-payment continues, the party not concerned could terminate the transaction in question. In addition, with respect to financial coverage, it is necessary to examine very carefully what is an interaction between force majeure and the grace/remedy provisions provided in the loan agreement and the ISDA agreement. (Back to the top) Let`s start with the simple part: The ISDA executive contract is clear: the communication of closure notifications and related items by email system or email is not authorized. The law on clauses implied in contracts is regulated: whatever can be done to give commercial value to the agreement, one cannot involve a clause in a contract contrary to its express terms.