It used to be that lenders would distribute loans with
covenants to ensure that their investments were mostly risk
free. Those days are, however, long gone in a market dominated
by cov-lite loans.
In 2015, cov-lite loans made up 27.2% of the market. By
2018, they would make up 83.3% of the market, with a further
increase to 85.7% so far this year.
"The benefits are from the borrowers’
perspective," said Allen and Overy partner, Matt Moore.
Borrowers now have more control in comparison to what they
could expect from previous packages. Traditional loans had
large amounts of covenants, which put power almost wholly in
the hands of the lenders.
See also: POLL: the risky business of
"In the 90s, lenders would have looked to the financial
covenants to assess the debtor’s performance and
effectively give early warning triggers about when a business
performance of a...