Investor proposals for model bond covenants

In an attempt to standardise sterling and euro bond documentation a group of investors The Bond Covenant Group (TBCG) - made up of The Association of British Insurers, the Investment Management Association, the National Association of Pension Funds and the Bundesverband Investment und Asset Management e. V. - have proposed a set of model bond covenants including clauses covering negative pledge, change of control, disposal of assets and provision of information. The proposals as drafted are, in the opinion of the ACT, more suitable for a non investment grade bank loan rather than an investment grade bond issue and show an inevitable bias in favour of the investors.

The ACT sees this as a missed opportunity to work towards a more balanced starting point from which issuers and investors could negotiate a bond’s terms.

• Model covenants in sterling and euro bond issues as issued by the Bond Covenant Group, June 2010
• ACT press release, 21 June 2010: ACT sees The Bond Covenant Group proposals for model bond covenants as a missed opportunity
• TBCG press release, 21 June 2010