Bulletin: High Grade Corporate Event Risk
November 20, 2015
In this piece, Corporate Credit Research Vice President Miriam Legrand reviews how Samson navigates growing event risk in the corporate sector. Bulletin Summary:
- Event risk, largely influenced by shareholder activists, has been growing in the corporate sector.
- Shareholder activism, primarily in the form of share buy-back activity, corporate restructuring and mergers and acquisitions, has recently driven the increase in corporate leverage.
- Leveraged buyouts, has been shown to significantly weaken a company’s credit rating.
- Change of Control (COC) covenants protect bondholders from corporate leverage transactions that weakens a company’s credit profile.
- By evaluating the likelihood of a leveraging transaction and the value of COC language, Samson aims to protect investors’ assets by mitigating the impact of increased event risk in corporate bonds.