Template:Isda Cross acceleration summ

Cross Acceleration: Cross Default for nice guys

Cross acceleration is not an actual ISDA {{{{{1}}}|Event of Default}}, but it is what happens to {{{{{1}}}|Cross Default}} if only you can persuade your credit department to water it down to something kinder and gentler. {{{{{1}}}|Cross Acceleration}} harks to a world in which people wait for third party indebtedness to be actually accelerated before closing out their ISDAs.

It is only an Event of Default once the Defaulting Party’s third-party lenders have actually accelerated {{{{{1}}}|Specified Indebtedness}} in an amount exceeding the {{{{{1}}}|Threshold Amount}}.

That is a much less sensitive trigger — a much worse trigger, a credit officer might say, but bear with me — and it avoids that weird scenario when the actual lender has not itself exercised its default rights, but you have exercised yours, even though your counterparty is still performing your contract to the letter.

Cross acceleration also avoids indeterminacy and nervousness of waiting for grace periods you might not know about to expire, oral waivers or amendments to the third party contract, granting indulgences for administrative and operational error and all that dreck: if the lender has actually accelerated the loan, grace periods and operational errors must have expired and therefore no longer matter. It is too late. The game is up.