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An Antidote For Poison Puts: A Eulogy For A Management Entrenchment Device, David Hudson

David Hudson

Poison puts are a type of event risk covenant commonly found in financing agreements. Lenders, both as bondholders and banks, utilize this provision as one layer of protection. However, poison puts can also be utilized to entrench a corporation’s management. The provision grew in popularity with the growth of the leveraged buyout boom of the 1980’s, but was frequently ignored during the subsequent economic growth period and merger activity that accompanied it. With the recent collapse in credit markets, companies and shareholders have challenged the provision’s interpretation and enforceability. These challenges have come in tandem with lenders taking more aggressive …