Acceleration Covenant

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."

BREAKING DOWN '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.

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