Series 79: Cross-default Clause

Taken from our FINRA Investment Banking Exam

Definition of the term Cross-default Clause...

a clause in a credit agreement or bond indenture stating that the borrower or bond issuer will be considered to be in default if it defaults on a different debt. The purpose is to give the lender or bond trustee more options for dealing with a borrower or bond issuer whose solvency becomes doubtful.

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