Corporate action events
DFLT: Bond Default
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DFLT tells bondholders that the issuer has failed to meet an obligation that counts as an event of default under the bond agreement, such as a missed coupon or principal payment, and has not remedied it within any grace period.
- Code
- DFLT
- Usually announced as
- MAND
What DFLT means
A bond agreement lists events of default: non-payment of interest or principal, breach of covenants, cross-default on other debt, insolvency and so on. Most allow a grace period. When it passes without a cure, the bond is in default. Holders, or a trustee on their behalf, may then be able to demand immediate repayment (acceleration) and start recovery proceedings.
The DFLT notice does not pay anything. It changes how the bond should be treated: it may trade flat (without accrued interest), coupons scheduled in the system may not be paid, and the price will reflect expected recovery rather than the coupon.
When you see it
- An MT564 with
:22F::CAEV//DFLTand:22F::CAMV//MAND, normally information only with narrative on the missed obligation. Euronext’s corporate events white paper lists bond default among information-only events. - Often linked to an INTR or REDM event that was not paid, and may be followed by bondholder meetings (BMET), consents (CONS), an exchange in a restructuring (EXOF), BRUP or LIQU. A credit event on a credit-linked note is CREV, not DFLT.
What to do next
- Stop expecting the missed payment: cancel or suspend the projected income for the unpaid coupon or redemption and tell clients that it was not received.
- Flag the bond for valuation and risk, review accrued interest treatment, and watch for the restructuring or recovery events that follow.