Evraz, the Russian steel producer controlled by Chelsea owner Roman Abramovich, lost 16.4p to 217.4p on news it wants an amendment to covenants associated with a $750m bond maturing in 2015.
But Evraz, the Russian steel producer controlled by Chelsea owner Roman Abramovich, has fallen 8p to 225.8p on news it wants an amendment to covenants associated with a $750m bond maturing in 2015.
One early factor was the emergence of a property market that was distorted by covenants which specified the race of the purchaser.
According to HSBC, a bank, some 85% of the bank debt extended since the start of 2004 and secured against commercial property in Britain has breached loan covenants (requiring a loan-to-value ratio of 75% or less) or debt-service requirements.
Whereas covenants exist mainly to keep companies on the straight and narrow, they also earn banks a handsome fee each time they are breached.
Some of the companies that they own are pretty much default-proof, thanks to the loosening of debt covenants by deal-hungry banks competing to provide loans.
But hard choices are looming.As the economic news worsens and profits dive, more firms will be at risk of breaching covenants on standard measures such as the ratio of debt to earnings before interest, tax, depreciation and amortisation.
Such conditions, known as covenants, typically specify limits on certain financial ratios, such as that of a company's earnings to its interest payments.
In addition, the number of covenants per transactions in the loan market is at record low levels.
British (and European) banks remain reluctant to lend as they re-build their balance sheets and are not enforcing covenants over bad loans.
In mid-November covenants on those loans were amended in return for an extra one and a half percentage points on the interest rate.
