Cross acceleration - 1987 ISDA Provision

1987 ISDA Interest Rate and Currency Exchange Agreement A Jolly Contrarian owner’s manual™ Go premium Overview — Summary — Premium — See also — Wikitext Crosscheck: →’87 equivalent →’92 equivalent →’02 equivalent Cross acceleration in a Nutshell™ The JC’s Nutshell™ summary of this term has moved uptown to the subscription-only ninja tier. For the cost of ½ a weekly 🍺 you can get it here. Sign up at Substack. You can even ask questions! Ask about it here. Original text Section 5(a)(vi) is amended by deleting “, or becoming capable at such time of being declared,” from subsection (1). See ISDA Comparison for a comparison between the 1992 ISDA and the 2002 ISDA. The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • FM • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM • ATE 5 Events of Default: FTPD • Breach • CSD • Misrep • DUSS • Cross Default • Bankruptcy • MWA Termination Events: Illegality • Tax Event • TEUM • CEUM Early Termination 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations; Payment Date • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET • Set-off 6 Early Termination: ET right on EOD • ET right on TE • Effect of Designation • Calculations • Payments on ET Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Resources and Navigation Index: Click ᐅ to expand: ISDA

Comparisons

Well, it doesn’t, as such, appear in the ISDA Master Agreement at all, but you could always have a look at our long-winded article about Cross Default to see how that works and why Cross Acceleration is different and, in JC’s view, a better approach to a bad deal.

Basics

Cross Acceleration: Cross Default for nice guys

Cross acceleration is not an actual ISDA Event of Default, but it is what happens to Cross Default if only you can persuade your credit department to water it down to something kinder and gentler. 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 Specified Indebtedness in an amount exceeding the 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.

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See also

• Cross Default