As an investment manager authorised and regulated in the UK, we are required by the rules in the Financial Services Authority (FSA) Conduct of Business Sourcebook (COBS) to disclose our commitment to the UK Stewardship Code.
Babson Capital Europe Limited (BCE) is an investment management company which invests primarily in European senior secured and mezzanine loans, and to a lesser extent in leveraged buy-out related high yield bonds. These instruments are traded through over-the-counter (OTC) transactions with other market participants.
The European senior secured and mezzanine loan markets are predominantly private markets. Investors and most trading counterparties within the loan market typically sign up to confidentiality in exchange for receiving regular private side information on current trading and covenant compliance from their investee companies. Small and medium-sized borrowers in particular insist on confidential dealings with their lenders where voting, amendment processes and communication of covenant compliance are concerned.
We are of the view that BCE’s clients are best served through appropriate private side information and conflict management processes which have been in place within the firm for many years. These processes are transparent and open to review and challenge by our clients. In fact, many of our procedures comply with the broad principles as outlined in the UK Stewardship Code (especially in the areas of managing conflicts of interest, the requirement to monitor investee companies and collaborative engagement with other investors). However, the inherently private nature of our target investment market does not allow BCE to apply the UK Stewardship Code in its current form.
As of January 2012