The past two years have seen an increase in demand for
safeguards for bondholders in the sterling and euro corporate
bond markets. This has been brought into sharper focus by the
recent leveraged buyout bids for companies such as ISS, Gecina
and Galeries Lafayette, as well as the inclusion of event risk
puts in the recent Wienerberger and Syngenta issues, all of
which emphasized the potential importance of covenants
protecting bondholders' investments. The challenge that lies
ahead is to address the concerns of investors without upsetting
the traditional balance between finance from borrowers'
relationship banks (often the final port of call for rescue
funding) and potentially cheaper funding from the bond
This debate is not new in the UK, but was resurrected in
October 2003 by a consultation group of fixed income investors
throughout Europe, known as the Group of 26. They outlined a
series of so-called best...