In securitisation, an acceleration clause is a provision in a securitisation agreement that allows the securitisation issuer to demand full repayment of the securitisation notes if certain events occur. These events may include, but are not limited to, a default by the underlying borrower, a change in the credit rating of the underlying borrower, or a change in the law that adversely affects the securitisation.
Acceleration clauses are designed to protect the securitisation issuer from losses if the underlying assets default or if the credit rating of the underlying borrowers declines. By accelerating the repayment of the securitisation notes, the securitisation issuer can avoid further
losses on the underlying assets. Acceleration clauses can have a significant impact on investors in securitisations.
If an acceleration clause is triggered, investors may be forced to sell their securitisation notes at a loss. Additionally, acceleration clauses can make it more difficult for investors to sell their securitisation notes if the market for securitisations is illiquid. Investors should carefully consider the risks of acceleration clauses before investing in securitisations.
- Acceleration clauses are typically included in securitisation agreements to protect the securitisation issuer from losses.
- Acceleration clauses can be triggered by a number of events, including a default by the underlying borrower, a change in the
credit rating of the underlying borrower, or a change in the law that adversely affects the securitisation.
- Acceleration clauses can have a significant impact on investors in securitisations. Investors should carefully consider the risks of acceleration clauses before investing in securitisations.