In simple terms, the “Applicable Rate” is just an interest rate which is applied to amounts which are due between the parties to a Global Master Repurchase Agreement, but which remain unpaid.
More specifically, if any amount payable under the 2011 GMRA or any Transaction is not paid when due, interest shall accrue on that amount. The rate of interest payable will be the GREATER of:
- The “Pricing Rate” for the relevant Transaction (if the overdue amount relates to a Transaction); and
- The “Applicable Rate”.
The exact “Applicable Rate” depends on the circumstances:
- If the amount relates to Paragraph 10 of the GMRA (in other words, if it has arisen following the occurrence of an “Event of Default”), then the “Applicable Rate” is the rate selected in a commercially reasonable manner by the non-Defaulting Party (in other words, by the party which is not subject to the Event of Default); and
- In all other circumstances, the “Applicable Rate” is the rate agreed between the parties acting in a commercially reasonable manner.
Want to know more about the Global Master Repurchase Agreement (GMRA)? Take a look at our A-Z of the GMRA!Contact Us