Event of Default
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A contractual event that, if occurring, allows creditors to accelerate the debt. Typical events include payment default, covenant breach, cross-default, bankruptcy filing, and material misrepresentation.
Event of Default in plain English
An 'event of default' is a tripwire written into a loan contract: if a borrower does one of these bad things, the lenders are allowed to demand ALL their money back immediately instead of waiting for the scheduled payments. That right to demand it all at once is called 'accelerating' the debt. Think of a phone plan that says 'miss a payment, break the rules, or lie on your application, and the whole balance is due today.' The classic tripwires: missing a payment, breaking a promise you made in the contract (a 'covenant'), defaulting on a DIFFERENT loan so this one trips too ('cross-default'), filing for bankruptcy, or having lied about your finances to get the loan.
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