Bond Covenants Key risk areas 2 Key risk areas in high-yield bonds Today we’ll will cover 4 areas in depth with obvious ratings implications » 1. Distributions / value transfers to other parties » Risky investments » 2. Debt incurrence / leveraging » Change of control (covered in Pt. I) » 3. Liens subordination risk » 4. Structural subordination risk » Long-term bond value All 4 will, where relevant, show examples of: » Investor friendly, conservatively structure