adverse situation under financing/other contract whereas client is in material breach as (i) conditions and stipulations of the contract were not respected or (ii) financial covenant was breached or (iii) the Borrower did not repay the scheduled installment. Such adverse situation would represent huge reputation damage for the Borrower, so that it may finds himself in difficult situation when seeking for additional financing. However, when it happens, this is usually solved by means of following steps:
- Granting additional remedy period during which Borrower may redeem the missed installments incl. Default interests and other fees;
- Granting a waiver when the Breach was caused by any minor event not having substantial effect on transaction and related risks (like not fulfilling some fin.covenant or minor change in ownership structure etc.);
- Acceleration meaning the increased installments in order to repay the facility sooner than originally anticipated.
The latter one (Acceleration) represents naturally the worst case scenario for a Borrower, because it may require some extraordinary measures on Borrower´s side like selling the assets in order to meet the Creditors requirements to repay the loans prematurely.