CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

Bond investors may lose considerable market value of their bonds if the company that issued them becomes the target of a leveraged buyout. The covenant intended to protect bond investors in LBOs is ______.

A. change of control call
B. change of control put
C. limitations on additional indebtedness
Correct Answer: B

This covenant gives investors reassurance that they can sell their bonds back to the company for essentially 100% of face value if the company gets bought out. If they didn't have such a provision and the company became the target of a LBO, the only way they might be able to unload their bonds would be for less than 100% of face value.

User Contributed Comments 0

You need to log in first to add your comment.