The fixed income credit markets have grown at a rapid pace. Although the sterling market is significantly more mature than the euro market, both markets are still very young. In particular, disclosure and documentation standards in the sterling and euro bond markets are poor compared to the US dollar market, where SEC registration and disclosure requirements bring discipline to the US bond market. The lack of meaningful covenant protection against event risk increases market volatility and hampers liquidity.
Investors in the sterling and euro bond markets are disadvantaged as a result of the lack of covenant protection. This is particularly true in the sterling market, which has a bias towards long-dated instruments.
This paper sets out proposed best practice in regard to:
A. Minimum covenants for corporate investment grade issuers
B. Issuer call options
C. Documentation standards
D. Disclosure
E. Credit Ratings
F. Secondary market liquidity
G. Relationship between issuers and investors