medium · Corporate Credit Analysis

If a Private Equity sponsor sells its 60% stake to a strategic competitor, what mandatory action is triggered for the bondholders?

1. The maturity of the bonds is automatically accelerated to the date of the closing of the sale.
2. The interest rate on the bonds automatically increases by 500 bps to compensate for the risk.
3. The issuer must make an offer to repurchase the bonds at 101% of their par value.
4. The bonds are automatically converted into common equity of the acquiring firm.

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