hard · Corporate Credit Analysis covenants
A credit analyst is reviewing an indenture where 'Cross-Default' is defined to occur only upon 'default in the payment of principal or interest at final maturity' of other debt.
How does this compare to standard 'Cross-Default' language?
- It is fairly standard drafting for High-Yield bonds but unusual for Leveraged Loans.
- It is significantly more restrictive for the borrower than market-standard cross-default drafting.
- It is a 'limited' cross-default that ignores interim covenant breaches or missed interim payments on other debt.
- It is effectively identical in scope and effect to a plain 'Cross-Acceleration' clause used in most loan agreements.
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