Event of default: Difference between revisions

}}An [[event of default]] is an action a counterparty takes which justifies the innocent party terminating the contract ''under its terms'', [[close out|closing out]] open transactions, and raining down fiery hell on the wronger and its affiliates, directors, officers, employees, agents and delegates.

Especially where the obligation in question is a [[repackaging]], [[securitisation]] or [[asset-backed security]], but even where it is not, an Event of Default is ''not'' the same as an “[[enforcement event|Enforcement Event]]”. Enforcement is the exercise of ones security rights under a security interest granted as credit support to the obligation. There are many reasons why, even upon an event of default, one might not want to enforce security, but in the case of an [[SPV]], generally enforcing the security won’t do anything, because the diminution in value of the creditors claim will be to the secured assets themselves, not the solvency of the vehicle holding them so the presence or absence of the security is rather beside the point. More in our article on [[enforcing security]].