Covenants

Credit fund stress tests may be ‘overly optimistic’

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

What happens when the financing tap gets turned off?

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.

Credit fund lenders and the impact of covid-19 on investments

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.

ELFA’s Fox: Investors are focused on how covenants will impact recoveries

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.

Alternative lending and private debt: What not to do in this crisis

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.

From theory to reality – the next crisis is here

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.

Waiting for the explosion: The dangerous game of covenant-lite

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

How cash can leak out, even in default

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

Asia covenant quality drops to its lowest level ever – report

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

Covenants are an even hotter topic in 2020

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.