Data services provider Sirius Computer Solutions wants to stop derivatives holders from influencing business decisions to benefit their bottom line at the expense of the borrower, Reuters reported. Language in the financing package backing Sirius’ buyout by private equity firm Clayton, Dubilier & Rice (CD&R) prohibits lenders that own derivative positions from voting on company matters. As investor activism rises, the borrower wants to prevent these holders from declaring a default that could pay off for their hedged trades. The new provision curbs Credit Default Swaps (CDS) holders’ ability to call a default by removing their right to vote on creditor decisions. In the future, companies may also consider blocking CDS holders from owning a loan altogether. Companies are trying to tighten documentation in the $1.2 trillion leveraged loan market to limit aggressive investors from pushing agendas that benefit their CDS holdings. The move to include the new tougher language follows two highly publicized U.S. court cases, one involving homebuilder Hovnanian and the other telecom services provider Windstream.
