The volume of high yield issued in the US reached a
record high in January. Lawyers say this was driven by two
things: more corporates taking early advantage of low coupons
to refinance debt maturing from 2012, and a spillover of
acquisition financings started last year.
Refinancings have been – and will remain
for sometime – their staple, but work generated from
new commitments has been marginally lower than expected. The
main culprit is the leveraged loan market’s return
to cov-lite lending.
"We are beginning to see maintenance covenants in
bank facilities [being] not quite as tight, or being taken out
completely leaving very few maintenance covenants in some
senior term loans," says Bill Whelan, practice head of Cravath
Swaine & Moore’s securities group. Sponsors
need to provide a little more equity than five years ago, but
otherwise they are getting similar loan terms.
Banks might also detract refinancings from the...