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.
What is cross acceleration?
Cross Acceleration means any Debt of the Company or any of its Subsidiaries is cancelled, or declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
What does it mean to be cross defaulted?
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 is a cross-default provision?
A cross-default provision makes an event of default under one loan by a lender, or its affiliate (“Lender Parties”), to a borrower, guarantor, or their respective affiliates (“Borrower Parties”), an event of default under another loan by a Lender Party to a Borrower Party.
Can banks cross collateralize?
Cross collateralization clauses can easily be overlooked, leaving people unaware of the multiple ways they might lose their property. Financial institutions often cross collateralize property if a customer takes out one of its loans and then follows up with other financing from that same bank.
What is cross acceleration in ISDA?
With cross acceleration, the third party lender defaulted against actually has to take action against the defaulting counterparty before you can trigger your transaction termination rights under your Agreement with that same defaulting counterparty.
What is cross default in ISDA?
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 is acceleration of debt?
An acceleration clause is a contract provision that allows a lender to require a borrower to repay all of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment and the repayment required.
What is an acceleration clause in a loan?
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 a subjective acceleration clause?
Subjective Acceleration Clause: A subjective acceleration clause is a provision in a debt agreement that states that the creditor may accelerate the scheduled maturities of the obligation under conditions that are not objectively determinable (for example, if the debtor fails to maintain satisfactory operations or if a
What happens in an event of default?
An event of default is a pre-specified condition or threshold that, if met, allows the lender or creditor to demand immediate and full repayment of a debt or obligation. An event of default may include delinquent or non-payment of principal or interest due, a breach of a bond covenant, or insolvency, among others.
What is a cross default threshold?
A cross default threshold is the minimum loan amount that can be subject to CD. With this clause, loan amounts below the cross default threshold will not trigger a loan’s cross default provisions.
What does cross secured mean?
Cross collateralization is a finance term that is used when a loan is secured by two or more properties. If you have a home and borrowed additional money for an investment property from the same bank they often cross collateralize or cross secure the properties to lend you additional money.
What is a cross collateralization agreement?
Cross collateralization agreements are a form of security that can be used as collateral for many different loans. They also allow for the use of one property as collateral on more than one loan.
How can cross collateralization be prevented?
Whenever possible, insist on stand-alone loans and securities. Take out separate loans for each new property with the deposit and costs coming from an established line of credit or offset account. Cross-collateralisation can be removed by the current lender, subject to LVR and product guidelines.
How do I get out of cross collateralization?
The best way to untangle yourself from a bad cross-collateralization situation is to contact the lender and attempt to renegotiate your loan. You might, for example, be able to secure the remaining debt with other collateral, although the repayment terms might be worse.
Is cross collateralization legal?
Lenders cannot use your business’s property as collateral without your consent. Lenders obtain your consent to cross-collateralization through a dragnet clause, which may allow the lender to use the collateral for any loans or other obligations your business may owe the lender.
