Fitch: Sapporo adds clause to bonds

Fitch Ratings said Sapporo Holdings Ltd.'s (rated BB/stable/B) recent issue of bonds with a change of control clause is a positive move as it addresses investors' concerns about the takeover bid offer. However, this is tempered to some extent by the weak covenants in the bond documentation, which provide limited protection to bondholders, the agency added.

In June, Sapporo issued bonds totaling ¥20 billion, which includes the right for bondholders to sell its bonds back to the issuer in the occurrence of a change of control. These bonds were reportedly well-received in the market, suggesting that the clause has provided some comfort to investors, Fitch said.

However, Fitch noted that the clause in Sapporo's bond documentation applies only to the newly issued bonds and does not extend its protection to the existing bonds directly or through a cross default mechanism, as neither the clause nor the put option exercise is in itself an event of default.

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