medium · Corporate Credit Analysis covenants
What is the primary benefit to a BORROWER of having 'Cross-Acceleration' instead of 'Cross-Default' in its entire debt stack?
- It allows the borrower to incur additional debt without tripping a maintenance ratio test.
- It meaningfully lowers the borrower's overall blended cost of capital across its debt stack over time.
- It provides a 'liquidity buffer' to fix defaults on smaller tranches before the whole structure collapses.
- It simplifies how the borrower's auditors classify 'Long-Term' versus 'Short-Term' debt maturities on the balance sheet.
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