medium · Corporate Credit Analysis
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 more debt without a ratio test.
- It lowers the overall cost of capital.
- It provides a 'liquidity buffer' to fix defaults on smaller tranches before the whole structure collapses.
- It simplifies the accounting for 'Long-Term' vs. 'Short-Term' debt.
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