the collective voice of bond investors.
A key figure, the link between investors and the issuer
The Bondholder representative is a person appointed to collectively represent the holders of bonds issued by a company. Under French law, this mechanism is governed by provisions of the Commercial Code.
This collective representation of investors makes it possible to defend their common interests, exercise their rights (legal action in the event of non-compliance with the terms of the issue contract or in the event of default, non-repayment for example) and negotiate with the issuer in the event of debt restructuring or collective proceedings.
The appointment of the Bondholder representative is most commonly made at the time of financing in the bond issue agreement or, depending on the case, by the general meeting of bondholders and by court order.
This appointment must comply with strict criteria, particularly in terms of integrity and independence, in order to avoid any conflict of interest with the bond issuer.
Depending on the bond issuer, certain commitments to comply with financial ratios and disclosure requirements (‘covenants’) may be requested by investors and, in the event of non-compliance, may trigger a callable clause. The Bondholder representative ensures that the issuer complies with these commitments and discloses the relevant information, and makes this information available to investors in private placements or club deals.
The bondholders may benefit from collateral put in place to secure repayment to investors.
Bond issues offered to the public or listed on a market, or for which the issuing companies are rated or listed companies with market rules that impose specific disclosure requirements enabling bond investors to have access to information on a recurring basis, do not generally provide for a specific commitment in the issue contract.
Any amendment to the bond issue agreement must be subject to a collective decision by the investors. The representative of the mass chairs the general meetings of bondholders, ensures that they run smoothly and that the decisions adopted or rejected are implemented.
Function of the Bondholder representative proposed by DIIS Group:
- Representation and defence of the common interests of investors for all legal acts
- Monitoring of covenants provided for in the issue agreement
- Beneficiary of securities
- Implementation of amendments to the contract through collective decisions (general meetings, written consultations)
- Acting as a facilitator in discussions between issuers and investors