Japan expects corporate bond issuers to better protect investors and encourage the use of covenants, paving the way for lower-rated companies to enter the bond market.
A working group led by the Japan Securities Dealers Association concluded a series of monthly meetings in June discussing the details of the application of covenants to lower-rated local corporate bonds.
The group agreed to apply change of control clauses and reporting covenants to bonds rated BBB+ and below, while keeping the terms flexible, an official at JSDA said. The former protect investors when there is a shift in the ownership of the company, while the latter require issuers to inform investors when the likelihood of default increases.
