Deals
Fate of Leveraged Loans Won't Be Decided by ‘Cov-Lite’ Alone
- Recovery rates likely lower in Europe but widely dispersed
- Focus on absence of maintenance tests is ‘simplistic’: Insight
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The lack of covenants on leveraged loans has become regulators’ favorite stick to beat the market with when they warn of overheating, but where companies run into trouble there are other risks impacting how much money lenders will lose.
Also of critical importance is how aggressively private equity sponsors use the increased flexibility now found in loan terms, and how good a job investors do in managing credit stress in their loan portfolios without the early warning signal of a formal leverage test.