High-yield bond investors in Europe are being offered a series of seminars on identifying weak safeguards in the sales documents amid growing complaints about unclear clauses.
Covenant Review will host the seminars in London with the Association for Financial Markets in Europe, an industry body for investors, lawyers and bankers, according to an e-mailed statement. The first session on Feb. 24 will cover restricted payments, a covenant that can reduce companies’ ability to pay shareholder dividends.
Bondholders are becoming increasingly concerned about safeguards after slumping commodity prices helped propel company defaults to the most since 2009. The pushback against the dilution of terms, and a campaign for better disclosure of the risks, follows a borrowing binge by Europe’s weakest companies.
“Understanding covenants is key,” said Martin Reeves, head of global high yield at Legal & General Investment Management, which manages about 728 billion pounds ($1 trillion). “It’s only after you go through a default cycle that you find out if loopholes can be exploited or not. It’s incumbent on the investor to know the risks.”
Covenant Review also plans to include a session on the marketing process for high-yield bond offerings and “how to push back” against the erosion of credit protections, said Sabrina Fox, the co-head of European research at the New York-based independent credit research firm.