Bonds and notes
Bonds and notes

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Bonds and notes
  • Characteristics and motivation of bondholders
  • Structure of a bond issue and key parties
  • Global certificate
  • Key documents and terms
  • Ranking within the capital structure
  • Bondholder trustees
  • Ad hoc bondholder committees
  • Senior secured bonds

The terms ‘bonds’ and ‘notes’ are used interchangeably (and there is no legal difference between the terms), though notes tend to be issued either continuously or intermittently with shorter maturities (under three years) and bonds issued in a discrete large offering with a longer maturity. For an introduction to the debt capital markets generally, see Practice Notes: Introduction to the debt capital markets and A beginner's guide to the debt capital markets.

Characteristics and motivation of bondholders

Typically bonds will be held by a wide range of investors based in various jurisdictions across the world. Bondholders tend to be institutional or private lenders and may include pension funds, insurance companies, investment funds, governments and large corporate entities.

Bonds are freely traded on the open market and this ease and frequency of trading means that it is more difficult to identify and communicate with a diverse and rapidly changing bondholder group during a restructuring than with a bank group. It is often harder to predict how bondholders will react, especially if they are not being guided by a bondholder trustee. The fact that the bondholders may be located in many diverse jurisdictions with a varying understanding of UK restructuring processes may also slow down negotiations.

The motivation of bondholders usually depends on the price at which they acquired their bonds and the size of their holding; those buying the

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