Mark-to-market regulations and banks’ hawkishness over non-performing loans in Japan means that cov-lites are unlikely to succeed in the country.
Last week IFLR explained why cov-lite loans would not return to Asia this year. A lack of institutional investors and appetite for collateralised loan obligations will prevent the risky structure from growing in the region, despite reappearing in the US.
But even when the structure does return, it will be...