Back, and scarier

Author: Danielle Myles | Published: 11 Jul 2011

Borrowers are getting more flexibility in US cov-lite deals than before the crisis. But changing market sentiment is dictating availability from week to week, with some US counsel seeing maintenance covenants creep back this month.

Up to 25% of 2011's leveraged loans have been cov-lite (according to Standard & Poor's), which now means no maintenance covenant in term loans but a leverage ratio in the revolver.

The revolver market is thinner than the term loan market, so borrowers have had to accept a financial covenant here, according to Davis Polk & Wardwell partner Joseph Hadley.

But term loan lenders have fought over the past months to include a cross default combined with a 45-day standstill provision, so they can benefit from the leverage ratio. "This has been a hot topic for negotiation in the US," said White & Case partner Eric Leicht.

But a cross acceleration provision has now become the norm in...