Moody's launches new high-yield corporate bond covenant database

By Angela McDaniels

Tacoma, Wash., Feb. 12 - Moody's Investors Service launched a database of high-yield corporate bond covenants, according to an agency news release.

In addition to covenant package information, the new database includes information such as bookrunners, private equity sponsors, credit ratings, loss given default and the use of proceeds.

The database includes more than 1,250 bonds issued globally since January 2010 and will be updated monthly.

"Our covenant database allows users to easily compare a bond's covenant protections with market standards and those of other bonds, to spot covenant trends in specific industry sectors and to compare covenant strengths and weaknesses across bond issues and issuers," analyst Matthew Musicaro said in the release.

"It also allows users to conduct various analyses of investor protections in existing and pending issuances."

For example, the database can be used to compare current practices in structuring with market precedents for a given sector or rating level.

According to Moody's, one trend the database shows is that average covenant quality for bonds issued in the United States and Europe was substantially weaker in 2012 than in 2011 and that this has continued into 2013.

The launch of the database follows Moody's introduction of Covenant Quality Scores, which assess the strength of a bond's covenant provisions on a five-point scale. The new Moody's Covenant Quality index, launched in January, is based on these scores.

Based on a three-month rolling average, the index declined in January to 3.89 from 3.79 on Moody's scale, in which 1.0 represents the strongest investor protections and 5.0, the weakest.

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