Tears for Sears
Bondholders have sued Sears, outraged by what they see as sharp practice in the retailer’s decision to buy back its bonds at par. Ironically their grievance rests on Sears’ exploitation of a covenant originally designed to protect bondholders, as Oliver Holtaway reports
US retail giant Sears, Roebuck & Co has stunned bondholders by using a covenant designed to protect investors in order to redeem a top-performing bond at par – effectively removing all bondholder value. Lawsuits are now flying between Sears and aggrieved investors.
The bond issue in question is a 20-year, $300 million bond issued in November 1991, with a 9.375% coupon. Issued when borrowing costs
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