Phil Allen, Operations Director explains how consent events help to ensure you are getting paid appropriately for changing company circumstances.
The business environment in which companies operate is ever changing. But when a company issues a bond, the legal documentation, including the information memorandum, is fixed at the outset. The issue documentation also sets out the rights and obligations of each party and what must occur if the company needs to vary the those terms at a later date.
If you are being asked to consider a consent event, then it is evidence that the originator of the bond, had considered your interests prior to issue, so it’s an overall positive for bondholders. .
If the company wants to change the terms and it impacts bondholders a consent event is needed. The issuer, via the trustee and custodian will write to bond holders requesting consent to vary the original terms.
There are common potential changes that are typically incorporated at the time of issue. An example might be to allow the issuer to redeem on payment anniversaries or at a specific premium.
Some changes are procedural and only require a simple majority, while more material changes that might have a significant impact on bondholders require a higher threshold to change bond terms. For example, a special resolution would usually require 662/3% or 75% of bond holders to pass the resolution .
A compensating consent payment is often made by the issuer to consenting respondents.
FIIG’s Debt Capital Markets team are diligent when negotiating a new bond issue in order to strike the right balance between:
- The issuer’s funding needs
- Its potential need for flexibility to conduct and grow the business
- Protecting investor capital and ensuring adequate compensation for risk
When a consent event occurs on a FIIG originated bond it is often confirmation of the strength and quality of the covenants we have insisted on; they are protection in action.
Voting within the allocated time span keeps disruption to a minimum.
If you have any questions concerning current or future consent events please call your relationship manager.