Issue 05: Treatment of Parties going directly into Level 2 Credit Default
Formal title: Treatment of Parties going directly into Level 2 Credit Default
There is an issue in respect of how Parties should be treated if their Credit Cover Percentage goes directly to a level at which Level 2 Credit Default should be called. It is unclear whether a Query Period exists in this circumstance and there is no provision for a Cure Period as there is for Level 1 Credit Default. This means that Parties are sometimes unable to raise additional Credit Cover to avoid being put into Level 2 Credit Default, if the potential event of default occurs on a non business day
The issue was considered the meeting of the SSMG on 20 August 2003. The group concluded that there may be merit in a Modification Proposal to clarify the provisions in the BSC.
A Modification Proposal was subsequently submitted by Total Gas & Power, and was raised as P142.