buy-in procedures
If buyer fails (other than because of an impossibility or illegality under 9.3) to deliver bonds after 5 Business Days after Physical Settlement Date, Seller may ‘purchase’ bonds pursuant to the “buy-in” procedures under 9.9:
(a) Seller gives Buy-in Notice specifying the Buy-in Date, the Relevant Bonds and the outstanding principal balance
(b) On Buy-in Date, Seller tries to obtain 5 or more Buy-in Offers from Dealers and determines Buy-in Price (the lowest or only Buy-in Offer)
(c) If not successful, Seller can try up to each of the next 4 Business Days (the Buy-in Period)
(d) Buyer’s right to deliver the Relevant Bonds is suspended during the Buy-in Period
(e) Seller can give another Buy-in Notice after 5 Business Days to commence another Buy-in Period if not successful at first
(f) Once the Buy-in Price has been determined, Seller will give notice to Buyer
(g) On the 3rd Business Days after the notice, (i) Buyer will be deemed to have delivered the bonds for which the Buy-in Price has been determined (ii) Seller to pay Physical Settlement Amount of Deliverable Obligation less (A) the product of (x) the Buy-in Price and (y) the outstanding principal balance of the Relevant Bonds and (B) reasonable brokerage costs incurred by the Seller.
The buy-in procedures may be limited to the so-called "60 business-day cap".
derivativeslawyer.com
Last updated February 2007
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