Sisal Group SpA failed to offer sufficient protections to investors in its recent high-yield bond issue even after making changes during the sales process, Covenant Review said.

The online gambling company didn’t do enough to prevent an acquirer manipulating debt-level tests, the researcher said in a note. In particular, bondholder protections still rely on net-debt levels, which can be distorted by temporary cash injections, rather than gross borrowings, it said.

The company’s bond-term alterations were “a completely ineffective attempt to deal with investors’ concerns or the problems inherent in using a net leverage test,” Covenant Review said. Milan-based Sisal changed a provision regarding so-called restricted payments, such as dividends, the research provider said.

Sisal didn’t answer calls and an e-mail seeking comment on bondholder provisions.

The company sold 725 million euros of fixed- and floating-rate notes on July 14, the first junk-bond deal in Europe after the U.K. voted to leave the European Union on June 23. Its 400 million euros of 7 percent bonds maturing in July 2023 are quoted at 101 cents on the euro, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE