Acceleration Covenant

AAA

DEFINITION of '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 any number of clauses being violated by the borrower including default or a downgrade of debt.

Also referred to as "acceleration clause."

INVESTOPEDIA EXPLAINS 'Acceleration Covenant'

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.

RELATED TERMS
  1. Acceleration Clause

    A contract provision that allows a lender to require a borrower ...
  2. Debt Security

    Any debt instrument that can be bought or sold between two parties ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Upgrade

    A positive change in the rating of a security. An upgrade is ...
  5. Swap

    Traditionally, the exchange of one security for another to change ...
  6. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
Related Articles
  1. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  2. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  3. Mutual Funds & ETFs

    The ABCs of Mortgage-Backed Securities ETFs

    ETFs focused on mortgage-backed securities, or MBS, offer an opportunity to further diversify the fixed-income portion of your portfolio.
  4. Investing

    How Swaptions Can Reduce Risk in Portfolios

    How can investing in Swaptions reduce risk in portfolios.
  5. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  6. Investing

    Strategies To Position Your Bond Portfolio

    Fixed income investors may not be able to see them all right now, but important trends are stirring on the investment horizon.
  7. Savings

    How To Make Money With Airbnb: Risks & Rewards

    Airbnb lets you turn your home or spare room into extra cash. Here's how to make money and protect yourself from the risks.
  8. Mutual Funds & ETFs

    Consider This High-Yield ETF's Risks and Rewards

    Finding quality high-yield opportunities isn’t easy, but the YieldShares High Income ETF (YYY) has potential.
  9. Investing

    What are Fixed-Income Securities?

    For a fixed-income security, the periodic return on the investment is the same throughout the life of the security. Principal is returned at the time of maturity. The payment can be in the form ...
  10. Mutual Funds & ETFs

    Top Emerging Markets Dividend ETFs

    These dividend ETFs offer similar — yet different — ways to play emerging markets.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center