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      Question

      Which of the following occurrences would legally trigger

      an 'Event of Default' clause in an infrastructure project loan?
      A An administrative change in the project management office's address. Correct Answer Incorrect Answer
      B Short-term market volatility resulting in a 1% dip in equity price. Correct Answer Incorrect Answer
      C The invocation of a cross-default clause due to non-payment on separate credit facilities. Correct Answer Incorrect Answer
      D Replacing the existing auditor with a new certified firm. Correct Answer Incorrect Answer
      E A systemic hike in the benchmark lending rate by the monetary authority. Correct Answer Incorrect Answer

      Solution

      Cross-default is a common clause. It states that if the borrower defaults on any of its loans (even with another bank), it is automatically considered in default, as it signals overall financial distress. A cross-default clause is standard in loan agreements. It triggers a default if the borrower fails to pay other debt, acting as an early warning of broader financial distress.

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