Negotiating ISDA Master Agreements

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This course can also be presented face to face in-house or via live in-house webinar.

Negotiating ISDA Master Agreements Course Objectives:

Participants will:

  • Be introduced to the different types of derivatives including equity derivatives and property derivatives.
  • Get an overview of their legal definition and type of risks hedged.
  • Have explained to them the ISDA Master Agreement with a detailed clause by clause review and a comparison of ISDA 2002 and 1992 Master Agreements
  • Master the schedule to the ISDA Master Agreement
  • Gain an understanding of the ISDA confirmation and the process on how trades are done.
  • Learn about the ISDA protocols, ISDA credit support annexes and credit support deeds.
  • Be appraised of financial collateral regulations.
  • Be taught about netting and valuation
  • Have an overview of the events of default and termination events.

Negotiating ISDA Master Agreements Course Content:

ISDA Documentation

Introduction and Architecture of ISDA Documentation – See Part 1 of this course

ISDA Master Agreement

  • Detailed clause by clause review (2002)
    • Single Agreement
      • Cherry picking
    • Netting legal opinions
      • Governing law on insolvency
    • Conditions Precedent
    • Withholding tax
    • Representations
    • Undertakings
    • Events of Default
    • Termination Events
    • Early Termination
    • Transfer
    • Multi-branch Parties
    • Waiver of immunity
      • Arbitration clauses
    • Comparison of ISDA 2002 and 1992 Master Agreements
      • Events of default provisions
        • Grace periods
        • Scope of the credit support default
        • Breach of agreement
        • Specified Transactions
        • Cross default provisions
        • Merger without assumption
      • Termination Events
        • Scope of Illegality
        • Force Majeure
        • Grace periods
        • Tax event upon merger
      • Methodology of calculating payments on early termination
        • First Method
        • Second Method
        • Market Quotation
        • Loss
        • Set-off
        • Unpaid amounts
        • Close-out amount

Schedule to ISDA Master Agreement

  • Parts 1 to 5 – Negotiating points
  • EMIR related amendments
    • Relevant EMIR Protocols:
      • 2013 EMIR Non-Financial Counterparty Representation
      • 2013 Reporting Protocol
      • 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol
      • Adherence Letters
      • Suggested EMIR Related Amendments

ISDA Confirmation

  • Process on how trades are done
  • EMIR reporting
    • 2013 EMIR Reporting Protocol
    • Grey area

ISDA Credit Support Annexes and Credit Support Deeds

  • Legal opinions
  • English law deeds and annexes
  • New York law annexes
  • 1995 ISDA Credit Support Annex
  • Close-out netting
  • Valuation agent
  • Eligible Credit Support
  • Haircuts and Valuation Percentages

Financial Collateral Regulations

  • Title transfer
  • Ring fencing
  • Close-out netting on insolvency

Netting and Valuation

  • Settlement Netting
  • Close-out Netting
  • Calculations
  • Mark to market valuations – How Swaps are Valued

Events of Default and Termination Events

  • Step to follow on Early Termination
  • Conditions Precedent
  • Timeline – summary of process
  • Checklists
    • Contractual terms breach
    • Events of Default and Termination Events
    • Legal, commercial and operational considerations
    • Early Termination Procedures

Case law

  • Section 2(a)(iii)
    • Lomas and others v JFB Firth Rixson Inc. and others
    • ISDA Amendment

GROUP CASE STUDY: Participants to work in small groups to draft and negotiate with another group a first draft of the ISDA Schedule to the 2002 ISDA Master Agreement in accordance with the client instructions provided in the case study pack

COPIES OF THE 2002 ISDA MASTER AGREEMENT AND THE ACCOMPANYING ISDA SCHEDULE WILL BE PROVIDED TO ALL PARTICIPANTS.

Background of the Trainer:

Trained as a lawyer, the trainer has over 19 years experience in international banking and structured finance transactions, including real estate finance, loans, leverage finance, debt capital markets, securitisation, structured products, repos, derivatives and financial regulatory and compliance. She has been actively involved in the creation of innovative award winning structured transactions and negotiating complex financings.

She has advised global institutions such as Credit Suisse, Citigroup and Goldman Sachs and spent many years practicing law at Allen & Overy LLP, Linklaters and Sidley Austin Brown & Wood in multiple jurisdictions including London, New York, Hong Kong, Singapore etc.

She holds a Law LLB (Hons) degree from University College London and has worked in the Finance Know-how team at Clifford Chance. She is an author and now runs her own business advisory, training and legal consultancy.

Negotiating ISDA Master Agreements Course Summary:

THIS COURSE IS PART 2 OF A TWO PART COURSE, THE FIRST PART IS TITLED “ISDA DOCUMENTATION”. It is highly recommended that participants attend Part 1 of this course prior to attending Part 2 as the content is a follow up from Part 1 and will not be repeated or summarised again in Part 2 due to time contraints.

Part 2 of this course covers pertinent issues related to the drafting, negotiating and understanding of the ISDA Master Agreements. This course is relevant for:

  1. Lawyers both in private practice and in-house,
  2. Traders, Bankers and Structurers involved in transactions involving swaps, CDSs, options, swaptions etc.,
  3. Operations teams involved with swaps, EMIR reporting etc.,
  4. ISDA documentation teams who typically draft and negotiate ISDA Master Agreements and trades, and
  5. Accountants who advise clients on swap transactions.

In this course we cover the ISDA documentation framework. A detailed clause by clause analysis is then undertaken of the 2002 ISDA Master Agreement followed by a comparison analysis between the 1992 and the 2002 ISDA Master Agreements. We will undertake a detailed analysis of the ISDA Schedule including any EMIR Regulation related language. The key negotiation points relevant in negotiating an ISDA Agreement will be covered off including the questions to ask depending on who you act for. We will then discuss the CSA, the Financial Collateral Regulations relating to the CSA specifically and the ancillary ISDA documentation. We will go through in detail the settlement netting and close-out netting and the calculations involved including how swaps are valued. We will cover off the Events of Default and Termination Events operative provisions, procedural timelines and checklists outlining the notice requirements, legal, commercial and operational points to tick off the list. We then cover off some case law and amendment to the ISDA Master Agreement.

The final part of the course will be an Interactive Group Case Study involving the documenting an ISDA Schedule and key issues to consider. COPIES OF THE 2002 ISDA MASTER AGREEMENT AND THE ACCOMPANYING ISDA SCHEDULE WILL BE PROVIDED TO ALL PARTICIPANTS AS PART OF THIS COURSE.

 

What Redcliffe’s clients are saying about the course:
“Good speaker and excellent handouts. Enjoyed the interactive elements.”

    Solicitor, Travers Smith

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“Case studies were the best part of the course!”

VP, Credit Suisse

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“Very relevant with practical examples.”

              Account Manager, SEB

“Very relevant content.”

Associate, Evercore

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11 October 2018