medium · Corporate Credit Analysis

In the context of credit agreement negotiations, why would a Private Equity sponsor strongly prefer 'cross-acceleration' over 'cross-default' in a TLB facility?

1. It allows the borrower to ignore payment defaults on other debt indefinitely.
2. It lowers the interest rate margin of the facility due to decreased lender risk.
3. It provides a 'bridge' to resolve minor defaults elsewhere without losing control of the entire capital structure.
4. It eliminates the materiality threshold requirement for other indebtedness.

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