Scepticism surrounds model bond covenants

Author: | Published: 20 Jul 2010
Nothing on the model bond covenant menu is appealing to issuers

Market practitioners have reacted with scepticism to a set of model investment-grade bond covenants proposed on June 21 by a consortium of industry bodies.

The Bond Covenant Group has proposed a framework for the language of certain bond covenants, designed to eliminate uncertainty from provisions such as the negative pledge, change of control and information dissemination clauses.

But issuers and capital markets lawyers insisted that the necessary information and transparency was already available, and that investors should perform more thorough due diligence on contracts before buying the bonds.

"The full...