Worst, Better, Best: Supermajority Provisions in European High Yield Bonds
Shoshanna Harrow, J.D. - Senior Covenant Analyst, Covenant Review
30 September 2025
Insights into European high yield supermajority provisions, sacred rights vulnerabilities, subordination mechanics, collateral release pathways, and best-practice protections, including:
Sacred rights and consent thresholds: Why European high yield bonds typically require only 90% (or 75% for Italian issuers) consent for fundamental changes—far lower than US high yield’s unanimous consent requirement—creating risks for minority holders.
Subordination and priming mechanics: How most European bonds omit payment subordination, lien priority changes, and collateral waterfall amendments from sacred rights lists, enabling issuers to prime existing bondholders with simple majority consent.
Collateral and guarantee release risks: Why “all or substantially all” thresholds and lower consent requirements (75% vs 90%) make it easier to strip away credit support, as demonstrated by Swissport’s €380 million super senior facility.
Grace period and class voting loopholes: How issuers like Food Delivery Brands and Codere exploit undefined grace period changes and aggregate series voting to disadvantage minority holders without triggering supermajority protections.
Best-practice blockers and anti-LMT provisions: Which covenant protections—including Payment for Consents requirements, explicit anti-subordination language, and liability management transaction blockers—provide the strongest defense against aggressive covenant amendments.
The Bottom Line ™️
• Subscribers often ask for suggestions as to how a weak covenant provision could be improved.
• In our “Worst, Better, Best” series, we review provisions from recent European high yield bonds and leveraged loans, explaining the concerns raised by the “Worst” category and the heightened protection provided by those in the “Better” and “Best” categories.
• Investors can refer to these examples when negotiating for improvements in covenant terms in primary deals.
• In this report, we consider supermajority consent provisions in European high yield bonds.
Overview
At Covenant Review, identifying weaknesses in high yield bond and leveraged loan covenants is our bread and butter.Once we’ve pointed out risks in relation to a particular provision, subscribers often ask us for suggestions as to how it could be improved, ideally (given the power of precedent) supported by examples of better wording included in other deals.
In our “Worst, Better, Best” series, we provide actionable intelligence using examples of key covenant provisions from recent European high yield bonds and leveraged loans, explaining the drafting deficiencies of those in the “Worst” category and the heightened protection provided by samples in the “Better” and “Best” categories, which investors can refer to when negotiating for improvements in covenant terms in primary deals.
In this installment, we consider supermajority consent provisions in European high yield bonds.
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