RE: Tokenize Mineral15 Jul 2025 18:26
A quorum for a bondholder vote, as it pertains to bond restructurings or other significant decisions, is the minimum number or percentage of bondholders (or their representative) that must be present (or represented) for the vote to be considered valid and for the results to be binding on all bondholders, including those not present. This quorum requirement is crucial for ensuring that decisions are not made by a small, unrepresentative group and that the interests of the wider bondholder community are adequately considered.
Key aspects of quorum in bondholder votes:
Minimum Percentage:
The quorum is typically expressed as a percentage of the outstanding bonds. For example, a common quorum requirement is 25% of the outstanding principal for an initial meeting, which might be reduced for adjourned meetings. NATs must have been higher.
Binding Effect:
Once a quorum is established and a vote is held, the results are generally binding on all bondholders within the same issue, regardless of whether they were present at the meeting or voted.
Protection for Minority Bondholders:
Some bond indentures may include provisions to prevent issuers from manipulating the vote by holding a disproportionate amount of the outstanding bonds, ensuring that a qualified majority of independent bondholders must approve any changes.
Importance of Adjourned Meetings:
If a quorum is not met at the initial meeting, a second, adjourned meeting may be convened with a lower quorum requirement. This is often done to encourage participation and to avoid the process from stalling.
Contractual Agreements:
Quorum requirements are typically defined within the bond indenture or related agreements. This means that the specific rules and procedures can vary between different bond issues.
Example:
If a bond issue has a quorum requirement of 25%, and a meeting is held where bondholders representing 30% of the outstanding bonds are present, then a quorum has been met. If a resolution is then passed by a qualified majority (e.g., two-thirds or three-fourths) of the present bondholders, the resolution is binding on all bondholders.
So there has been the 1st vote (unknown % required for a quorum) but it wasn't reached.
The 2nd the adjourned vote with reduce quorum of 25% fail to meet this. As above reduced % to prevent a stall.
Now a 3rd vote at the end of the month again to prevent a stall but with no changes to the restructuring deal.
If you were a bondholder sitting and seeing the BoDs being paid more than your due in interest would you happily take a haircut? Hence there is little appetite to vote.
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