Cross default occurs when a debtor defaults on one obligation, and as a result, is in default on all obligations. This can happen when the terms of different obligations stipulate that a default on one obligation constitutes a default on all obligations. Cross default can also occur when a debtor is unable to make a payment on one obligation, and as a result, is unable to make payments on all obligations. This can happen when the debtor does not have enough money to make all of the required payments.
What does cross acceleration mean? Cross acceleration is the change in the rate of acceleration of one security in relation to another security. Cross acceleration is used as a measure of the relationship between the two securities and is a key input in many quantitative investment models.
What is a cross-default threshold? A cross-default threshold is the level of debt a company must reach before it is in default on its obligations. This threshold is typically stated as a percentage of the total debt the company has outstanding. For example, a company with $1 billion in debt may have a cross-default threshold of 10%, meaning it would be in default if it owed $100 million or more to its creditors. What is negative pledge clause? A negative pledge clause is a clause found in many corporate bonds that prohibits the issuer from pledging its assets as collateral for other debt without also pledging the same assets to the holders of the bonds. This protects bondholders from being subordinated to other creditors in the event of a default. What does cross pledged mean? Cross pledged assets are assets that are pledged as collateral for two or more loans. In the event of a default, the assets are sold to repay the loans.
What is an example of a negative covenant?
A negative covenant is a covenant in a bond indenture that limits the actions that the issuer of the bond can take. For example, a negative covenant may prohibit the issuer from taking on additional debt, selling assets, or changing the terms of the bond.