Covenants and other key terms in the European high-yield market
Produced in partnership with Gilles Teerlinck of White & Case and Brian Dearing of White & Case

The following Banking & Finance practice note produced in partnership with Gilles Teerlinck of White & Case and Brian Dearing of White & Case provides comprehensive and up to date legal information covering:

  • Covenants and other key terms in the European high-yield market
  • What are high-yield covenants?
  • Overview of main high-yield bond covenants
  • Limitation on indebtedness
  • Limitations on restricted payments
  • Limitation on liens
  • Limitation on sales of assets and subsidiary stock
  • Limitation on affiliate transactions
  • Limitation on dividend and other payment restrictions from restricted subsidiaries
  • Mergers, consolidations and sales of substantially all assets
  • More...

Covenants and other key terms in the European high-yield market

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for DCM lawyers?

What are high-yield covenants?

High-yield bond covenants are crafted to reduce or eliminate value leakage by restricting certain types of activities by the issuer and its restricted subsidiaries. In general, they are only triggered when a company takes certain specified corporate actions. These include, but are not limited to, the incurrence of additional indebtedness or the transfer of value out of the group (including, for example, assets or cash) and are therefore also known as 'incurrence' covenants. Incurrence covenants are only tested when the issuer or any of its restricted subsidiaries take relevant corporate actions that are restricted by the covenants. Unlike a typical European senior bank facility, high-yield bond covenant packages will normally not require the issuer to maintain compliance with specified financial requirements on an ongoing basis, ie, they do

Popular documents