Investor group calls for stronger bond covenants

Author: Lynann Butkiewicz | Published: 17 Dec 2007

Bond covenants can be strengthened by a consensus between investors and issuers, according to a white paper released today by The Credit Roundtable Group.

The white paper points out that many bonds have decreased in value recently because of the weaker language they include in their covenants, and a lack of transparency over what protections are actually provided.

The Group suggests model covenants for investment grade bonds, which it hopes will restore confidence to bondholders and perhaps increase liquidity. It stresses, however, that the white paper is intended as a stimulant for debate, and a route to find better industry standards through discussion and compromise.

Over 50 financial firms, fixed income investment managers and public pension funds have joined to form The Credit Roundtable Group. It includes names such as AIG Investments, BlackRock Financial Management, Fidelity Investments and ING...