Author: Stephen Norton (1999)

Stephen Norton, B.Sc, Chairman, Loan Capital Committee
(From Issue 8, July 1999)

An important issue currently confronting loan capital trustees is the provision of certificates by auditors confirming adherence by issuers to certain financial covenants. The `big five` firms of auditors have unilaterally decided not to produce such certificates for the benefit of trustees even though this has been accepted practice for many years, upon the basis that their contractual relationship is with the issuer and not with the truste Regrettably, the step has been taken without prior consultation with either trustees, issuers or institutional investors. Where certificates are addressed to the directors of the issuers, they often specifically state that whilst copies may be provided to trustees, they may not place reliance upon them. Auditors have also requested that trustees should enter into letters of engagement, and have sought to impose limits on their liability.