Change of Control
Corporate Credit Analysis glossary · Credit Agreements & Covenants
Definition
A covenant provision triggering a mandatory offer to repurchase bonds at a specified premium (typically 101%) upon a qualifying change in ownership or control of the issuer.
Change of Control in plain English
A 'change of control' clause is a safety valve for bondholders: if the company they lent to gets bought or taken over by new owners, they get the right to sell their bonds back — usually at a small bonus, often 101 cents on the dollar (so $1,010 back on a $1,000 bond). Why? Because new owners might load the company with risky debt or run it differently, and lenders never signed up to trust strangers. It's like renting a room in a friend's house with the deal that if your friend sells the place, you can walk away and get your deposit back plus a little extra. ('Covenant' just means a promise written into the loan contract that the borrower must keep.)
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