In terms of legal and financial terminology, a federal state is a promise, in a cancellation or other formal debt agreement, that certain activities are carried out or not or that certain thresholds are met. Financial agreements most often refer to the terms of a financial contract, such as a document. B loan or bond issue that specify the limits to which the borrower can grant other loans. Alliances can also have negative consequences. Since the creditor imposes restrictions on the debtor`s activity, the debtor`s economic freedom is limited. This can lead to a reduction in efficiency. If a confederation is broken and additional capital is to be provided, the debtor may not be able to provide it, or at least inappropriately. As a result, the entire loan is due; a resulting fire sale may result in significant amortizations on the debtor`s accounts. A borrowing offence is a violation of the terms of the links. Borrowing pacts are used to protect the interests of both parties if the federal government`s involvement in the recovery of the loan, i.e. in the binding agreement, the contract or the document between two or more parties.
Agreements are commitments made by a borrower under a long-term loan contract. They are intended to help the lender ensure that the risk associated with the loan does not deteriorate unexpectedly before maturity. From the borrower`s point of view, alliances often seem to be an obstacle to negotiating a loan and restrictions on its life. As a general rule, a violation of a federal state can lead to a default that is declared, penalties are imposed or the loan is called. The legal provision of the loan agreement that provides for the loan to be “called” is the “acceleration clause”: once the buyer is late, all future payments due under the loan are “accelerated” and are considered due and immediately payable.  If an issuer violates a loan contract, it is considered a technical delay in payment. A common penalty for breaching a bond alliance is the downgrade of a bond rating that could make it less attractive to investors and increase the issuer`s borrowing costs. For example, Moody`s, one of the largest rating agencies in the United States, estimates the quality of a bond on a scale of 1 to 5, five of which are the worst.
This means that a loan with an alliance note of five is an indication that alliances are systematically violated.