“Issuers are being more aggressive in the way they are going about debt exchanges; they’re looking for additional ways to coerce bondholders that haven’t been interested in participating,” said Scott Josefsberg, an analyst at the debt research firm. “But investors are putting up a fight so far.”
Sinclair ultimately exchanged around 3.6% of eligible notes.
A representative for the broadcaster had no immediate comment, while Shenkman declined to comment beyond confirming its role leading the creditor group.
Sinclair’s exchange offer was hardly the only one to provoke the ire of investors in recent weeks.
SM Energy Co.’s efforts to get creditors to swap their bonds into new securities at 50% to 65% of face value have faced significant pushback. With only about 10% of note holders agreeing to tender last month, the oil and gas driller struck a separate agreement with a group of creditors led by BlackRock.
The side deal was designed to backstop the exchange, and the BlackRock-led group got better terms for swapping its debt versus what was offered to other creditors. The move infuriated other lenders, who organized with law firm Weil Gotshal & Manges to oppose the deal.
Bondholders that accept the exchange must agree to eliminate almost all restrictive covenants on the existing debt, which would hurt anyone who doesn’t participate. The deadline for the tender has been extended to June 12.
SM Energy, BlackRock and Weil Gotshal & Manges didn’t respond to requests seeking comment.
Revlon Clash
Analysts have been warning investors for years that weakening protections would ultimately have costs as investors ceded more and more ground to borrowers. Yet despite the recent surge in corporate stress, a Moody’s Investors Service gauge of bond covenant quality remained near the weakest on record in April. A similar tracker for loans reached its lowest ever in the fourth quarter, the most recent data available.