Q&A with Simon Duff, Co-Chair ELFA Disclosure & Transparency Committee

Q. How would you describe the mission and aims of the ELFA Disclosure & Transparency Committee?

SD: The Disclosure & Transparency Committee works to facilitate effective engagement, improve the quality and content of disclosure, increase access to information, and educate investors on the risks of incumbent covenant flexibility and restructuring issues.

Q. With high profile companies currently undergoing liability management, what advice would you give bondholders for restructurings?

SD: Reach out to other investors to improve communication and achieve critical mass.  Be organised and proactive as time pressure is your enemy.  Agree a group objective and keep communicating to maintain confidence in the group and group cohesion.  Consider appointing a non-investor FA or steering committee of core bondholders to lead discussion with the issuer.

Q. What is driving the rise in creditor on creditor violence over the past couple of years?

SD: A deterioration in covenant protections such as on amendments and waivers, and on loan buybacks an increasing willingness by sponsors, affiliates and others to engage in creative and aggressive solutions with increased pressure on capital structures generally.

Q. How have you seen covenant packages change since the last cycle?

SD: We’ve seen a general broad based weakening and erosion of covenant packages across the board from collateral packages, to asset sales, to restricted payments, to incurrence tests via loosening of ratio tests and proliferation of carve outs and pro-forma calculations.

Q. How do you anticipate terms changing as we move into the second half of 2023?

SD: Expect to see continued aggressive documentation but with elevated potential to push back where there is a more difficult refinancing that needs to work harder to gain bondholder support.

Q. Which projects are the D&T committee working on which most excite you?

SD: Ongoing “teach-ins” around specific topics including Creditor on Creditor Aggression, Corporate Action Strategies for Noteholders, combined with efforts around a Transparency Pledge

Simon Duff is a Senior Analyst at M&G covering Telecom, Media & Technology and he co-chairs the Disclosure & Transparency committee with Rebecca Clements