您好， 题目中提到的cross default division 有什么作用。

问题如下：

Mojofon’s capital structure consists of the following:

Mojofon’s bonds all contain a cross-default provision. If the company is to default on one of its senior unsecured bonds:

选项：

A.

the secured bonds are likely to have full recovery.

B.

the credit loss on senior unsecured bonds will be the same as that on subordinated bonds.

C.

the subordinated bonds will rank below shareholders, who may dictate how recovery is to be distributed.

解释：

The correct answer is A.

Senior secured bonds rank the highest in the priority of claims, and their recovery depends on the value of the asset collateral. Since the value of asset collateral (60) exceeds the amount of secured bonds outstanding (50), the secured bonds are likely to have full recovery in an event of default. Senior unsecured bonds have higher priority over subordinated bonds, which in turn have higher priority over common equity in insolvency.