What is cross acceleration in ISDA?

Cross acceleration – the cross default clause is effectively downgraded, such that the non-defaulting party to the third party agreement has to accelerate the indebtedness and take proceedings to terminate the third party agreement before the non-defaulting party under the ISDA is able to declare an Event of Default.

What is a cross-default clause example?

Cross default is a provision in a bond indenture or loan agreement that puts a borrower in default if the borrower defaults on another obligation. For instance, a cross-default clause in a loan agreement may say that a person automatically defaults on his car loan if he defaults on his mortgage.

What does it mean when a loan is accelerated?

Definition. An accelerated clause is a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions.

What is an example of an acceleration clause?

Acceleration clauses are typically contingent on on-time payments. For example, assume a borrower with a five year mortgage loan fails to make a payment in the third year. The terms of the loan include an acceleration clause which states the borrower must repay the remaining balance if one payment is missed.

Which is the best definition of cross acceleration?

Cross-Acceleration. A clause which operates by defaulting a borrower under Agreement A when it defaulted under Agreement B and the lender under Agreement B accelerates repayment.

How does cross acceleration work in a loan agreement?

A clause which operates by defaulting a borrower under Agreement A when it defaulted under Agreement B and the lender under Agreement B accelerates repayment. A cross-acceleration provision effectively gives the lender under Agreement A the benefit of the default provisions in Agreement B.

Where can I find a cross acceleration clause?

Cross-acceleration clauses are common in indentures and investment-grade credit agreements. For more information, see Standard Clause, Loan Agreement: Cross-acceleration Event of Default.

How does cross acceleration affect rights conferred by cross default?

The market regards cross acceleration as a downgrading of the rights conferred by Cross Default. This downgrading therefore affects the timing of a Non-defaulting Party’s right to terminate.