Failure to pay

Indra Rajaratnam


This chapter focuses on a failure to pay. It begins with an outline of the conditions applicable to a failure to pay and highlights some delayed payment and opportunistic strategies that have been widely reported in the news and that have precipitated calls for reform to the product terms to address “narrowly tailored activity”. These reforms have led to the establishment of a new condition with respect to a failure to pay in relation to non-sovereign reference entities, namely the “credit deterioration requirement”. This requirement has been enshrined in a new supplement, namely the “2019 Narrowly Tailored Credit Event Supplement to the 2014 ISDA Credit Derivatives Definitions” published by ISDA (International Swaps and Derivatives Association Inc. 2019c; henceforth, the “NTCE Supplement”). This supplement and the related “Interpretative Guidance” contained in it to assist in determinations concerning satisfaction of the “credit deterioration requirement” are also analysed. A narrowly tailored case study has been incorporated in the relevant section to provide a practical demonstration of the operation of the Interpretive Guidance. The chapter then concludes

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