Banks are being sued for loan provisions that can protect corporate clients from boardroom attacks by hedge funds and hostile bidders, the Wall Street Journal reported today. The lawsuits, filed on behalf of shareholders of corporate borrowers, say that the provisions — which require companies to repay debt ahead of schedule if dissidents seize majority control of their boards — entrench incumbent directors and discourage dissidents whose arrival could benefit all investors. The cases shine a light on corporate defenses of all stripes, which are under scrutiny as hedge funds ramp up boardroom assaults and hostile bidders seize on a hot merger market. The lawsuits against Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and other banks in recent months also highlight a tug of war between lenders and corporate borrowers that has intensified as loan protections have eroded in recent years, market participants said.
