Study On Restrictive Covenants Of Bond Contract

With bond defaults in recent years as the background,this article selects the restrictive clauses in the bond contract as the research objects,combined with the restrictive clause in the actual application,discusses the the legal basis and practical value of bondholders' interests protection and the functional orientation of bond contracts,to consider from various angles the perfection of the restrictive terms of the bond contract.This article is divided into four chapters.The first chapter discusses the emergence and concept of restrictive clauses by discussing the conflicts between shareholders and creditors.Based on the limited liability of shareholders,there is a conflict of interest between the shareholders and creditors,and there is a certain moral hazard.By designing the relevant restrictive clauses in the bond contract to restrict the behavior of the issuer,the creditor can be informed in time of the changes in the value of the bond,and in accordance with the relevant provisions of the contract to take the most effective action to protect their own rights and interests,to achieve the creditor's financing purposes and rights protection.The use of restrictive clauses in bond contracts is the key to creditor contracts fulfilling the protection function of creditors.It can curb shareholder opportunistic behavior,reduce bond financing costs,and make up for the disadvantages of the trustee's unclear scope of responsibilities,and in turn,through the perfect supervision of the system,the implementation of restrictive clauses.The second chapter based on the data statistics and typical case analysis,this paper points out that the restrictive clauses of bond contract in China's development status,on the one hand,in practice,the use of restrictive clauses in bond contracts isextremely rare,especially if the related clauses are not introduced in bond contracts,and the existing restrictive clauses are of a single nature.On the other hand,under the background of administrative intervention,the bondholder's right to request for repayment of debt has been fully exposed by the government department,and the restrictive provisions of the bond contract can not play its due function.These problems are mainly manifested in the fact that the provisions of the legal system governing the restrictive clauses of the bonds are very vague,and there are certain drawbacks in the example guidelines of the existing industry associations that need to be improved.After the "rigid payoff" has been broken,the bond market with in-depth market development is in urgent need of obstructing the bond issuer in advance in the form of bond contracts on the basis of following the laws of the market to prevent the credit risk of bond default.At the same time,due to the deficiencies in the information disclosure and trust management system of the bond market,the existing restrictive clauses are not supervised and enforced.Creditors cannot understand the issuer's behavior in a comprehensive and timely manner,and it is difficult to make a rational judgment on the company's solvency,which hinders the application and development of restrictive clauses and their protection of bondholders' protection functions.On the basis of the above issues,The third chapter elaborates on the development and evolution of restrictive clauses in the US bond market from a vertical perspective.In particular,the RJR leveraged buyout case has a significant impact on the reinvigoration of restrictive clauses.In combination with the scrutiny of the content and experience of the restrictive clauses in the U.S.bond contract,the U.S.mainly selects the restrictive asset disposal terms of the U.S.bond contract,limits the cash payment terms,limits the debt liability terms,and restrictive terms of the event,and summing up the inspiration and reference for the development of restrictive clauses in our country.The fourth chapter,from the perspective of respecting the laws of the market,proposes reference suggestions for guiding the practical application and functioning of restrictive clauses.Mainly to improve guidelines for restrictive terms,focus on comprehensiveness and flexibility,and use different restrictive terms for different issuers and investors.At the same time,focuses on the establishment and improvement of convergence systems such as information disclosure and trusteeship management systems to supervise the implementation of restrictive clauses.This paper,through the construction and improvement of the relevant system of restrictive terms of bond contracts,it provides for different bond issuers to make selections so that they can follow rules in the formulation of bond contracts,so as to reduce the cost of the formulation of bond contracts and to achieve the balance of interests of all parties.It also promotes China's bond market to reduce its dependence on administrative protection and promote the market-oriented development of bonds in China.