What happens when the issuer of a bond being used as collateral in a classic...

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