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Joe Kaufman Quoted in Bloomberg on Bond Redemption Matters
07.23.18
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Corporate Partner Joe Kaufman was quoted in Bloomberg on calls from U.S. bond investors to modify redemption provisions that may be triggered by the failure to complete M&A transactions. The article, titled “Bondholders Tire of Losing Out When Funding Failed Acquisitions,” discussed borrowers repaying bonds at 100% of par via a “make-whole” call, rather than at 101% via a special mandatory redemption (SMR) relating to the specific M&A transaction. The article also noted increasing frustration from investors as rising Treasury rates drive down the price of make-whole repayments. “To be sure, it’s rare for bonds to be called back at a make-whole price under the 101% premium guaranteed by the SMR,” Joe said. “Such a bond would need a low coupon, rising Treasury rates and only then could the make-whole calculation come out below the SMR premium of 101%.”
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