The information in this site is intended for consultants, institutional investors and trustees only.

The information contained in these pages must not be used or relied upon by private investors. We recommend that you read our 'Terms & Conditions' before browsing the site.

Please click submit to confirm that you are a consultant, institutional investor or trustee and wish to continue.


How to approach cov-lite lending in Europe


Covenant-light, or ‘cov-lite’, lending is now the norm in both the US and Europe, but there are as yet few tests of the difference that may be felt in times of stress. Well-established lenders nevertheless understand that they need to exercise caution when evaluating each loan opportunity to ensure they are getting paid for the risks, including when the cycle turns. 

The evolution of the European leveraged loan market has brought some benefits like the advent of multi-billion corporate issuers and an active secondary market, as well as some unwelcome features including the dilution of structural protections, like maintenance covenants.

Assuming that a loan manager is alive to the robustness of the borrower’s credit profile and the inherent protections of seniority and security – and assuming efforts to push for excessive documentation flexibility can be successfully resisted or declined – there remains a strong rationale to invest in this relatively stable, high income-generating part of fixed income, despite the late-cycle position of developed markets.

Read the paper

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested.

For institutional investors only. Not for onward distribution to any other type of client. No other persons should rely on the information contained on this website.