Jackson Taylor shows how bondholders are affected by 'event risk' and explains the major types of contractual covenants that are used to protect against it. The analysis notes the different practices often employed in the retail and institutional bond markets and the effect of conversion rights and the presence of senior bank lending. The effectiveness of these covenants in restraining prejudicial corporate conduct is considered in light of the remedies available under Australian law.
The book then provides a comprehensive survey of the protection available under the general law for the large numbers of bondholders who lack adequate, or any, covenant protection. This reviews both well-established legal rules (for example capital maintenance requirements and directors' duties) and considers more innovative applications of regulation and doctrine (such as just and equitable winding-up and other Corporations Act remedies). In each case, the focus is on the special circumstances applicable to the corporate bond context, illustrated with reference to American bondholder litigation and suggestions for how Australian law might resolve things differently.
Table of Contents
CHAPTER 1: INTRODUCTION
Bondholders and shareholders
Contractual protection
The American 'bondholder rip-off'
Australian bondholders
CHAPTER 2: COVENANTS
Restrictive covenants
Financial covenants
Other protective covenants
Remedies
CHAPTER 3: COVENANTS IN AUSTRALIAN CORPORATE BONDS
The sample
Survey results
CHAPTER 4: NON-COVENANT PROTECTION: REGULATION AND DOCTRINE
Capital maintenance
The statutory covenant
Contract law
Directors’ duties
Remedies
CHAPTER 5: EVALUATION
Distributional fairness
Wealth transfers and ex ante compensation
Theories of enhanced bondholder protection
CHAPTER 6: CONCLUSION - Bondholders' Rights in Australian Law
APPENDIX A: Retail Bonds
APPENDIX B: Institutional Bonds
Bibliography
Index