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Fed’s Junk-Loan Caution Spurs Creative Accounting Alchemy

Lenders are increasingly allowing junk-rated borrowers to adjust their earnings to make them look more creditworthy as U.S. regulators increase pressure on banks to refrain from underwriting too-risky deals.

Such tweaks, which are permissible under more and more credit agreements, can help companies stay in compliance with their loan terms or to raise debt.