Cross-Default vs Cross-Acceleration: How to Compare the Trigger Before You Sign

Compare the two triggers by what has already happened under other borrowed money, and by what this lender can do next. Cross-default applies when the other creditor merely becomes entitled to accelerate. Cross-acceleration starts when that creditor has actually called the debt, or when a payment is missed after grace.

A clause still headed Cross-default is true cross-default only while the other creditor merely becomes entitled to accelerate. Delete that limb and what remains is cross-acceleration. The heading does not decide. The ACT Borrower's Guide (6th edition, November 2022) says the same of Clause 23.5: remove that limb and the clause changes even if the title stays. You are marking one English-law facility page.

Disclaimer: Checkory provides AI support, not legal advice. Consult a qualified lawyer for binding decisions.

Why mark the four limbs when the heading already says Cross-default?

Only the limb that applies when another creditor merely becomes entitled to declare the debt due makes this clause true cross-default. Non-payment, an actual acceleration, and a cancelled commitment can sit in a cross-acceleration clause. Mark the four limbs on the margin before you keep or delete any of them.

• Non-payment of other Financial Indebtedness.
• Debt declared due early because of an event of default.
• A commitment cancelled or suspended because of a default.
• A creditor merely entitled to declare the debt due.

Clause 23.5 keeps this lender level with a creditor who has accelerated, or who only has the right. A 20 August 2026 note calls a mere entitlement true cross-default. The Practical Law note abstract and published samples draw the same line, not a market figure. If a cancelled undrawn limit leaves the ability to pay untouched, mark it for a branch edit.

Which debt counts: borrowed money, or a late supplier invoice?

Count borrowed money and guarantees of that borrowed money. Leave a late trade invoice outside unless the definition in this clause pulls ordinary trade payables in. Open Financial Indebtedness on this draft and tick the closed list, rather than the heading on the events page.

The closed list is moneys borrowed, including overdraft, acceptance credits, bonds, finance leases, recourse receivables, commercial effect of a borrowing, derivatives, counter-indemnities, and guarantees of that list. A trade payable is not listed. For example, a late invoice counts only if a limb catches it. Curtis, on 8 April 2011, says to exclude trading contracts and to limit the clause to financial indebtedness. A see-to-it guarantee and a letter of comfort are different documents.

Why take the threshold and the longer grace from this draft?

Use the figure already printed in this draft. There is no universal market number to paste in. Non-payment elsewhere counts only once the longer of the two grace periods has expired. An amount disputed in good faith stays outside until the dispute ends or the sum is paid.

No Clause 23.5 default sits below the agreed figure, and the investment-grade template does not pre-fill one. The August 2026 note says the draft chooses one sum, one creditor, or an aggregate. A typical mistake is to treat the shorter grace in the other agreement as already run. Curtis says to give time to pay a demand sum. Pinsent Masons says to agree a threshold and keep on-demand facilities of this creditor outside.

Why does an on-demand ancillary overdraft stay off the main facility?

An overdraft is moneys borrowed. A demand that makes an on-demand ancillary overdraft due can look like that money falling due early, and the main facility can follow. Write a carve-out, or document a committed ancillary facility that can be withdrawn only when acceleration is already allowed.

Travers Smith, in a May 2017 note, says that overdraft usually sits inside a revolving credit facility and is withdrawn on demand, so the main cross-default should not arise from the demand alone. In life beyond financial covenants, an uncommitted demand is usually a cross-default and takes the committed facilities with it.

When does a cured event stop counting as continuing?

The event counts only while it is continuing. This lender can accelerate only if the event of default is still continuing. Ask for the words remedied or waived. If the draft says the event continues unless waived, a cure without a written waiver leaves the right to accelerate in place.

The guide usually gives borrowers until remedied or waived, not only until waived. Macfarlanes, on 26 March 2025, still wants a written waiver for a point-in-time breach, because a cure may not be obvious. Where there is no written waiver yet, Travers Smith says a cured technical default can still support acceleration. Pinsent Masons says that right ends once the event is remedied or waived.

How do the two triggers sit on one grid before you sign?

Set the two triggers on one grid: what has already happened under other borrowed money, and what this lender may do. When the limbs, the borrowed-money limit, the threshold and grace, the overdraft, and continuing are marked, choose one line. Sign, send the branch edit, or hand the high points to counsel (a qualified lawyer).

Use counsel if the entitlement limb has no threshold, covers the whole group, and catches the overdraft. Send a branch edit for one gap. Sign when the cells are filled.

Section 5(a)(vi) of the 2002 ISDA Master Agreement applies only if the Schedule includes Cross-Default. A January 2024 note treats one limb as wider than actual acceleration. That is the swap page, not a second pass on this loan.

The heading is not the test. Once the entitlement limb is gone, a page still titled Cross-default is cross-acceleration.