The Primary Plight and Bondholder Rights

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The Primary Plight and Bondholder Rights

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Cross-border and cross asset-class convergence rumbles on in the European high yield bond and leveraged loan markets. 

Buysiders, bankers and advisors participated in expert discussions at Debtwire's recent event in London. The current status of the European high yield market in the context of the wider leveraged finance landscape was the subject of debate.

Covenant creativity was the subject of a lively discussion between Martin Reeves, Head of Global High Yield at Legal & General Investments, and Marwa Elborai, Partner in the Capital Markets Group of the London Office of Shearman & Sterling.

Key takeaways from the panel discussion included:

  • In the currently turbulent leveraged finance market, issuers are seeking to retain maximum flexibility by running dual-track high yield bond and Term Loan B financing options simultaneously with a view to devising the ‘best fit’ for the specific deal;
  • It follows that there continues to be cross-border and cross-asset class convergence between the terms of leveraged loans and high yield debt instruments as evidenced by the increasing prevalence of the TLB cov-lite phenomenon adopted from the US and incurrence covenants adopted from high yield;
  • Despite the European high yield bond market being ‘younger’ than the US high yield market, European issuers tend to be at the forefront of new covenant technologies and innovations relative to their US counterparts – case in point: the greater willingness in Europe to entertain leverage-based portability and an issuer’s option to redeem 10% of its bonds at 103% during the non-call period;
  • Optimising transparency will continue to be a key consideration for participants in the European high yield market, not least because management will need to be mindful of their enhanced transparency and disclosure obligations in light of the EU Regulation on Market Abuse, which will have direct effect in all EU member states, including the UK, from 3 July1;
  • Expect the migration from the US (particularly the oil and gas and mining sectors; where US investors are very focused on the extent of debt that can ‘prime’ their claim) to the European high yield universe of coercive debt exchanges as an out-of-court restructuring tool.

To receive more insight on artistic add-backs and innovative incurrence limits, contact Christine Tadros at Xtract Research.


Written by
Christine Tadros Head of European Research Xtract Research

Christine is an English qualified lawyer with over 19 years of qualification comprising extensive experience in practice in banking and finance law at leading City law firms. She is Head of European Research at Xtract Research – global provider of covenant analysis for the High Yield Bond and Leveraged Loan markets.

United KingdomLegal UpdatesLeveraged Finance Published: 23 June Written by
Christine Tadros Head of European Research Xtract Research

Christine is an English qualified lawyer with over 19 years of qualification comprising extensive experience in practice in banking and finance law at leading City law firms. She is Head of European Research at Xtract Research – global provider of covenant analysis for the High Yield Bond and Leveraged Loan markets.
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