Three problems with hung high yield bridges

Author: | Published: 11 Oct 2011

With the high yield market shut and a growing number of hung high-yield bridge loans, lawyers are focusing on the terms of the loans. Hastily agreed provisions are being scrutinised, with three key areas needing to be examined.

The first is security hardening periods, which are problematic in countries where new security must be taken in order to be provided in favour of new debt.

“In the UK where broadly drafted security documents in place can be expressed to secure future obligations, issuing new notes shouldn’t be a problem,” said James Boswell, senior associate at Clifford Chance in London.

But in certain countries such as France and Italy, new security may need to be taken and is susceptible to challenge if an insolvency occurs a specified time after the security is put in place (the security hardening period).

And under...