Bondholders definition

There is no generally accepted definition of bondholder value. It could be set equal to the market value of a company s debt. The market value of outstanding debt could be increased by issuing more bonds. This would adversely affect the market value of existing debt. Alternatively, bondholder value is based on the yield spread to government bonds the wider the spread, the higher the risk associated with the issuer. A spread widening due to the company s activities leads to a reduction of bondholder value. 

Cross-default clauses. Cross-default clauses state that if an issuer defaults on other borrowings, then the bonds will become due and payable. The definition of which borrowings are covered can vary. The cross-default clause usually carves out defaults in borrowings up to a certain threshold (e.g., 10,000) to prevent a minor trade dispute or overlooked invoice from allowing the bondholders to put the bonds back to the issuer. 

Prohibition on the sale of material assets. In order to protect bondholders, most documentation prohibits the sale or transfer of material assets or subsidiaries. The definition of material can vary considerably. 

The definitive global bonds are not usually issued except in exceptional circumstances due to their higher cost. The definitive notes are delivered to the bondholders, and the ownership is transferred by hand delivery of such definitive note. 

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