Covenants are becoming more flexible for borrowers as they
shift attention from initial public offerings (IPOs) to private
lending in 2018.
Banks, which are have been the traditional go-to lenders in
many European jurisdictions, are seeing their position
challenged by private debt funds. Because private equity firms
operate in a more loosely regulated area, they can provide more
flexible terms (so-called cov-lite) which is driving
competition in the EU and US markets.
As such, more companies are putting off going down the IPO
route in favour of seeking out alternative sources of capital.
In particular, the availability of more flexible terms of
private funding, fuelled by the growth of cov-lite agreements,
has increased the average time to IPO from
five or six years in the 1990s to nearly 10 at present.