A New Kind of Hedge-Fund Activism Has Arrived
Creditors will have more power when they sit down with Covid-distressed companies. That could help everyone.
You know the party’s over when creditors insist on collateral.
Photographer: Brittany Murray/MNG/Long Beach Press/Getty
In the coronavirus era, even the most aggressive hedge funds have had to relent and refrain from asking companies to speed up dividend payouts and share buybacks. But it could make way for a new kind of activism.
Covid-19 is shifting the balance of power between borrowers and lenders to the latter. Creditors are asking for more as they come to the negotiating table: In the U.S., bonds backed by collateral are rising. Last month, investment-grade cruise ship operator Carnival Corp. issued $4 billion of bonds at 11.5% for three years – terms befitting junk-rated debt – backed by $28 billion of ships and assets. In Europe, sports-car maker McLaren Automotive Ltd. is sparring with its bondholders over security for new emergency funding.