Covenants

With bond and loan issuance having been brought to a crashing halt by the coronavirus crisis, Sabrina Fox says weak covenants will be equated with weak governance.

There is light at the end of the tunnel for the private debt market as long as it learns from past crises, argues Gabriella Kindert of Mizuho Europe.

Private debt professionals have frequently shared the view that the good times couldn’t last forever. Amid the global spread of coronavirus, they are set to be challenged as never before.

Fewer covenants can provide greater flexibility in dealing with portfolio company difficulties, but they may also prevent lenders from negotiating rescue plans with borrowers and sponsors. Andy Thomson and Andrew Hedlund investigate

The restricted payments covenant has changed unrecognisably as borrowers seek more room for manoeuvre in a downturn.

The trend of deteriorating covenants looms over lenders’ risk protections, yet Asia still ranks top in covenant quality globally.

Unable to force deal sponsors to the table in times of stress, lenders find themselves effectively handcuffed. No wonder the covenant-lite loan remains one of the asset class’s big talking points.

Complacency may have crept into the private debt market. An inevitable change in circumstances will put firms to the test, says Oaktree co-chairman Howard Marks in this video.

What defines the Stateside private credit market in 2019? Our recently published US report identified the following themes.