M&A event risk is back with a vengeance and bondholders are apparently reaching breaking point. They have grown increasingly wary of leveraged buyout risk over the past year. And recent events have pushed them over the edge.
UK airport operator BAA’s €2.85 billion bond transaction was going fine until Spain’s Grupo Ferrovial made its buying interest known. Then, with payment on the bonds not yet settled, investors demanded, and got, protection. Should a change of control result in the company’s paper falling into junk territory, bondholders have a put at par.
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