How can bondholders protect themselves from managers’ actions that negatively impact bondholders?
How can bondholders protect themselves from managers’ actions that negatively impact bondholders?
Homework Answers
When a bond is issued, features of the bond are included in the Bond Indenture. The indenture includes the responsibilities of the issuer and is overseen by a trustee to protect the investors. The indenture states any negative or restrictive covenant an issuer must adhere to. Negative covenants restrict the activities of an issuer and prevent certain activities by issuer unless agreed to by the bond holders. Restrictive covenants protect the interests of bond holders. Examples of such covenants are restrictions on issuing new debt unless the existing debt has been paid off.
So bond holders need to check Indentures for presence of such covenants and invest in those bonds with negative covenants which provide better protection.
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How can bondholders protect themselves from managers’ actions
that negatively impact bondholders?
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DQ2: Both the budget process and budgets themselves can impact management actions, both positively and negatively....
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Both the budget process and budgets themselves can impact management actions, both positively and negatively. For...
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Both the budget process and budgets themselves can impact management actions, both positively and negatively. For...
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