Acceleration Covenant

Acceleration Covenant

A clause included in certain debt securities and swap agreements stating that the immediate collection of payment and termination of contract will take place should default or a downgrade of debt occur.

Notes:

This covenant helps to protect parties that extend financing to businesses in need of capital. Under an acceleration covenant, the borrowing party must maintain a specified credit rating in order to prevent termination of the contract and immediate repayment.

See also: Covenant, Debt, Debt Securities, Downgrade, Swap, Upgrade