Jurisdiction(s):
United Kingdom

Key definition

Event of default definition

What does Event of default mean? An event of default is a contractually defined trigger that, when it occurs, entitles the non-defaulting party to terminate the contract and/or exercise agreed remedies (for example, accelerate debt, enforce security, suspend performance or step in). It is not a statutory term; its meaning depends on the wording of the contract and is used across finance, commercial and derivatives documentation (for example, LMA loans and the ISDA Master agreement). Typical events include non-payment, breach of covenants or undertakings, misrepresentation, insolvency or insolvency proceedings, cross-default, illegality, change of control and material adverse change. Clauses often require notice, allow a cure or...

Loan-to-Value Covenants in Secured Lending: Key Terms, Valuations, Declaring Defaults, Borrower Defences, Cure/Workout Options and Market Conditions

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

This Practice Note looks at:

the principal features of loan to value (LTV) covenants in secured lending transactions
possible issues with calling an Event of default arising from a LTV covenant breach
potential challenges to an event of default based on a LTV covenant breach
remedying a LTV covenant breach
the impact of the economy on LTV covenant breaches

LTV covenants are a vital element of risk management in secured lending. An LTV covenant is a common financial covenant that requires the outstanding principal of a loan, expressed as a percentage of the value of the security charged in favour of a lender, to stay below a specified threshold for the life of the loan. This gives lenders a means to monitor and protect the strength of their security over time.

For borrowers, grasping and negotiating these covenants is key to achieving favourable loan terms and steering clear of the pitfalls that can arise from a breach. Although a lender relying on an LTV breach to declare an event of default has generally been regarded as relatively uncontroversial, there are a number of issues to consider...

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James Walton

Charles Russell Speechlys LLP

James has over 20 years post-qualification experience advising on all forms of finance transaction. He advises lenders, borrowers and other market participants on senior debt, mezzanine debt, equity investments, loan acquisitions, ‘loan on loan’ transactions and other forms of debt financing transactions, as well as loan restructurings and enforcements. His clients include banks and specialist lenders, debt funds, family offices, loan servicers, private equity funds, insolvency practitioners and corporates.James has extensive expertise in advising on real estate debt financings, acting on both the ‘lender side’ and ‘borrower side’ of these transactions, working on transactions involving all types of real estate, both in the UK and overseas.He has experience in both buying and selling performing and non-performing loans and loan portfolios and ‘working out’ non-performing loans and loan portfolios post-acquisition, including advising on restructuring and security enforcement strategies and working with clients to extract value from the...

Yvett Talas

Charles Russell Speechlys LLP

Yvett advises on a wide range of banking transactions, including corporate acquisitions, debt refinancing and restructuring, and real estate investment and development finance....

Web page updated on 21/05/2026

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