Outstanding principal balance and due and payable amount

Indra Rajaratnam

9.1 INTRODUCTION

This chapter examines the concepts of “outstanding principal balance” (OPB) and “due and payable amount” (DPA). The former applies to “borrowed money” obligations, while the latter applies to “non-borrowed money” obligations. The relevance of these terms in the context of the 2014 ISDA Credit Derivatives Definitions (henceforth the “2014 Definitions”; see International Swaps and Derivatives Association Inc. 2014b) and the three- and four-stage methodologies for determining the OPB are described in this chapter, together with examples from historical deliberations where the OPB of certain affected instruments was reduced to below par. The amendments to the calculation of the OPB where the 2019 Narrowly Tailored Credit Event Supplement to the 2014 ISDA Credit Derivatives Definitions (the “NTCE Supplement”)¹¹ See International Swaps and Derivatives Association Inc. (2019c). is applicable to a transaction are also elaborated upon. These additional amendments have formed the standard trading convention for non-sovereign transaction types since January 27, 2020, as part of reforms implemented to address “narrowly tailored activity”. The chapter concludes with a brief