ACI Dealing Certificate (#448)

What happens when the issuer of a bond being used as collateral in a classic repo fails to pay a coupon on the bond during the term of the repo?

The transaction is terminated and the collateral is returned to the seller
The transaction is rolled over until the coupon is paid or the issuer becomes insolvent, at which point the seller becomes an unsecured creditor of the issuer
The buyer is obliged to make a manufactured payment to the seller and becomes an unsecured creditor of the issuer
The buyer is not obliged to make a manufactured payment to the seller but the buyer is likely to ask for margin