Bonds
Creditors Fight Back Against Asset Stripping in New Bond Sales
- At least two junk borrowers have added investor protections
- Backlash grows after Altice debt move spooked creditors
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Loose bond documentation that flourished in the easy-money era has left investors vulnerable to asset stripping in recent debt deals. Now they’re fighting back.
In the past week alone, two junk borrowers — Italian luxury supplier Rino Mastrotto and Vodafone Spain — have included stricter provisions in documentation for new bonds that restrict their ability to move assets out of reach of creditors. Clauses in both cases were focused on payments to so-called “unrestricted subsidiaries,” or entities that are not bound by the covenants of a debt agreement.