Covenants

While the eyes of many are on loan documentation, Nicole Downer of MV Credit says the focus should be elsewhere, including fostering solid relationships with sponsors

While the eyes of many are on loan documentation, Nicole Downer of MV Credit says the focus should be elsewhere, including fostering solid relationships with sponsors.

It was widely predicted that the market downturn would profoundly alter behaviour in leveraged finance, but then along came EBITDAC as a reminder of the past.

As an example of the practice surfaces, an industry body is warning other companies not to use the covid-19 outbreak as an excuse to try and raise additional finance through flexible documentation.

A new reporting guide will divide the companies that are keen to impress with their transparency from those uncomfortable under the spotlight.

Looser debt covenants could allow an increasing number of rated Chinese property companies to take out even more debt, says a Moody's report.

The outbreak of the virus is the trigger for the pain likely to be suffered by many lenders and investors. But Gregory Racz of MGG Investment Group says the roots of this pain were to be found in poor deal structuring.

Although valuations are unlikely to fall in the short term, managers should be wary of expecting a rapid recovery in the global economy.

Debt funds and their portfolio companies have grown used to tapping cheap debt facilities, but underperformance amid the covid-19 crisis may see access to finance restricted.

What are the key issues facing lenders in the face of global pandemic? Four partners from Ropes & Gray share their thoughts on issues ranging from MAC clauses to covenant defaults.