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
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
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