1st Community Project
The best analogy for analyzing bond documentation for the first time I have is this. It is like being asked to butcher a cow with a butter knife. You know what cuts of beef you want, but you don’t have the right equipment and that cow is BIG.
“Learn. Grow. Repeat”
Our first “Community Project” is going to be creating a checklist for analyzing bond covenants. The aim is to produce a concise and useful document that will allow us to summarize the covenants of any given issuer “nose to tail”. It should cover Security, Debt Capacity, Restricted payments, Change of Control, Permitted Liens, Asset Sale and Guarantor/ Non Guarantor coverage to name a few.
We are looking for High Yield professionals willing to share some of their time to make this happen.
“If you want to master something, teach it.” -Richard Feynman
Covenant quality has been on the decline, indeed Moody’s published yesterday that Leveraged Loan Covenants are at their weakest on record.
Further more “priming” is becoming much more common as issuers look to shore up their capital:
update from Matalan on CBILS: "The Lenders have confirmed that they would require any such funding to rank alongside the most senior debt in the structure, which would require Matalan to seek the relevant Bondholder consents to increase the size of the super senior basket"
— EuroHighYield (@EuroYield) April 27, 2020
What Can You Do?
- Volunteer – If you have the time and would like to help put together the covenant checklist then email us at [email protected]
- Spread the word – share this article on social media
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