A recently released research report by Moody’s Investors Service examines the credit impacts of activist shareholder activity, arguing that shareholder initiatives do not always benefit bondholders. In fact, the report suggests that the means by which shareholders drive change in capitalization and strategy, including through share repurchases, increased dividends and divestitures of cash-generating assets, often stresses credit metrics, increasing the risk of holding corporate bonds.

Moody’s argues the risk for bondholders is growing as activists increasingly identify opportunities in larger credit rated companies and as these companies take more proactive steps to avoid being targeted. The report found the industries … Continue Reading