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Private Companies Are Flush With Cash as Economy Resurges

  • Covenant breaches dropped to a three-year low of 3.1%: Lincoln
  • Stronger earnings are translating to higher valuations

A resurging economy is leaving midsized private companies better able to pay their debt, according to investment bank Lincoln International.

The companies violated their lending terms -- usually a sign of being short on earnings or cash -- just 3.1% of the time in the second quarter, the lowest level in three years and down from 9.4% at the peak of the pandemic, Lincoln said in a statement including data about covenant breaches. Risks remain, but companies are earning more and have greater capacity to pay their debt obligations, Ron Kahn, a managing director at the Chicago-based firm, said in the statement.