On default bond meaning

This checklist highlights the main points to weigh up before making a call (claim) on a conditional bond, also referred to as a default bond. Any call is directed to the surety, typically an insurer or surety firm. Here, we assume a contractor has furnished the bond to its employer; the same approach generally applies where, for instance, a contractor seeks to call a performance bond issued by its sub-contractor. Is the bond on demand or conditional? The drafting of the bond ought to clarify this, though the label it uses is not conclusive. Consider: Who stands as surety? On demand bonds are commonly supported by banks, while conditional bonds are typically supported by an insurer or surety company. Is the contractor named as a party? For an on demand bond, the contractor need not be a party; for a conditional bond, they may well be. What is the extent of the surety’s liability? Where the surety’s duties under the bond operate independently...

Introduction High yield bonds sit within securities regulation and, save for a few narrow carve-outs, are subject to New York law irrespective of the issuer’s domicile. They are brought to market under an indenture, which also provides for the appointment of a trustee to act for the bondholders. For further detail on the high yield product, see Practice Notes: Introductory guide to high yield bonds and High yield debt in 11 jurisdictions worldwide. For a snapshot of the principal deal papers needed for a high yield issuance, see Checklist: Issuing high yield bonds-documents list. Beyond setting out the issuer’s key covenants, the indenture includes provisions required to administer the bonds and to enable the bond trustee to discharge its duties. The trustee’s core role is to handle administrative matters for bondholders before any default and, where appropriate, to pursue enforcement on their behalf. For commentary on material terms and covenants in high yield, see: Introductory guide to high yield bonds-High yield bond terms and Practice Note: Covenants and other...

How are section 278 and section 38 agreements revealed? Check the outcome of the local search and the seller’s replies to enquiries. A section 278 agreement will only be registrable as local land charges if: it has been entered into pursuant to an obligation in a s 106 agreement; or the highway authority (HA) has declared that there has been a financial default under the agreement. Section 278 agreements Section 278 agreements are used where a developer requires off-site work (other than simple access) to be carried out to a highway. The HA may design and construct the highway works at the developer’s expense. Alternatively, the agreement can appoint the developer as the HA’s agent to undertake the works, in which case a bond must support the agreement. If the developer carries out the works, a certificate of practical completion is issued once the HA engineer is satisfied that the works are complete. Following successful completion of a 12-month maintenance period,...

In this issue: Lending On demand bonds Aviation finance Real estate finance Derivatives Cryptoassets Daily and weekly news alerts New and updated content Useful information Lending DG Resources Ltd v HMRC [2025] EWHC 201 (Ch) The Chancery Division allowed DG Resources Ltd’s appeal opposing HMRC’s attempt to wind up the company. The dispute centred on whether delivering a winding-up petition to a Companies House default address amounted to valid service under the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024. The court determined that, where a company’s registered office is at a default address, service must comply with the hierarchical scheme in IR 2016, SI 2016/1024, Sch 4 para 2. That scheme is exclusive, displacing the general service route in section 1139(1) of the Companies Act 2006 (CA 2006). HMRC had not served the petition in the manner required, so service was ineffective; accordingly, proper service had not been achieved. Although DG...

In this issue: Lending Sustainable finance Debt capital markets Derivatives Regulation for derivatives lawyers Daily and weekly news alerts New and updated content Useful information Lending Email correspondence can give rise to waiver of facility agreement (Little v Olympian Homes Ltd) This matter concerned two bids to set aside statutory demands that arose from personal guarantees linked to a facility agreement. The principal sum was settled late, prompting the lender to issue statutory demands for default interest due under that agreement. The applicants maintained that the lender had surrendered its right to contractual interest via email correspondence (contractual waiver) or, in the alternative, through its conduct (waiver estoppel). The court made it plain that the applicants could not rely on any suggestion of an oral waiver of the facility agreement’s terms, because the agreement expressly stipulated that any contractual waiver must be in writing...

Banking & Finance—October 2025 case round-up AerCap Ireland Ltd v AIG Europe SA and others [2025] EWHC 2529 (Comm) Aviation finance—recovery of losses under insurance policies—sanctions This ruling follows the June 2025 decision in AerCap Ireland Ltd v AIG Europe SA [2025] EWHC 1430 (Comm), where Mr Justice Andrew Butcher found for AerCap, the world’s largest aircraft lessor, and other lessors, confirming that jets and engines left in Russia after the 2022 invasion were definitively lost. The present judgment records Mr Justice Butcher’s orders on costs and sets out his reasoning on the award of interest and on whether permission to appeal should be granted. Songa Product and Chemical Tankers III AS v Kairos Shipping II LLC [2025] EWCA Civ 1227 Shipping finance—interpretation of Clause 29 of (BIMCO) Barecon 2001 standard bareboat charter form The Court of Appeal dismissed the owner’s challenge concerning the proper construction of Clause 29 of the BIMCO Barecon 2001 bareboat charter. The court held that, although bareboat charters grant...

What are investment-grade, high yield and crossover bonds? Investment grade (IG) bonds are debt instruments that hold an IG credit rating: BBB and above on the S&P and Fitch scales, and Baa3 and above on the Moody’s scale (for further detail on credit ratings, see Practice Note: Credit ratings). IG issuers are usually sizeable blue‑chip corporates—well‑known, well‑established and well‑capitalised—and are often companies with shares listed on a major stock exchange. Aside from sovereign bonds of developed markets, IG securities are widely regarded as among the safest income‑generating investments. As a consequence of this perceived safety, IG bonds tend to offer lower yields than high yield (HY) bonds. Many institutional investors and pension schemes operate policies and mandates that constrain their bond holdings to assets with, on average, lower default risk, such as IG instruments or government obligations. In broad terms, HY bonds encompass all bonds from issuers rated below IG. HY issuers may include public companies that lack (or previously had but later lost) an IG rating, private companies...

This Practice Note explores the principal legal terms typical of social housing finance and what distinguishes them from financing in other sectors. It focuses on standard financial covenants and other sector‑specific provisions, including events of default, together with terms linked to the availability of long‑term fixed rate interest options. For more on social housing finance transactions, see Practice Notes: Social housing entities entering into finance transactions Key deal structures in social housing finance Taking and enforcing security from social housing entities This Practice Note concentrates solely on private not‑for‑profit providers of social housing registered in England (referred to as ‘RPs’), as they comprise the vast majority of private debt finance raised by housing associations to date. It does not cover providers registered in Wales. Financial covenants—introduction The principal financial covenants in social housing finance are: loan to value gearing interest cover (less commonly) net rental income cover from charged properties Loan...

What does this Practice Note cover? This Practice Note describes the duties and functions of a bond trustee appointed under an English law trust deed for a bond issue. A trustee is not a feature of every bond offering. Some issues proceed without one. The issuer chooses whether to use a trustee or a fiscal agent—see Practice Note: Parties in an issue of debt securities—Fiscal agent or trustee. Bringing in a trustee has significant implications for the issuer and for bondholders (see: Reasons for appointing a trustee below). In this Practice Note, ‘bonds’ is used as a catch-all term for debt securities of all kinds (such as bonds, notes and commercial paper). Be aware, however, that alternative considerations can arise in structured finance deals. For an explanation of the difference between ‘bonds’ and ‘notes’ and the definition of ‘commercial paper’, see Practice Note: Types of debt securities. Who is the bond trustee? The trustee is appointed by the issuer and serves as the go-between for the issuer...

An initial consideration at the outset is to ask why B wants a legal charge. Is it intended to ensure the works are completed? To enable B to do the works in default? Or is it about finance, ie does B seek security so that, if A fails to do the work, B will obtain monies (eg by selling A’s land) to cover the cost of the works required accordingly?...