hard · Corporate Credit Analysis covenants
In a 'Double-Dip' or 'Uptiering' transaction, why might non-participating lenders be particularly worried about cross-default provisions?
- Because the new 'super-priority' debt will likely contain cross-default triggers designed to prime their existing claims and collateral.
- Because if the borrower defaults on the new super-priority debt, it will automatically trigger a default on their own debt via cross-default.
- Because they may find themselves forced by intense market pressure to accelerate their own debt before they are truly financially ready.
- Because cross-default clauses tend to increase the loan's 'effective life' calculation by extending its overall amortization and full repayment profile.
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