Market graphic - European speculative grade default trends

Highly leveraged companies are moving from covenant breach to default much quicker than in previous years, as Standard & Poor's reveals.

Financial covenants are primarily designed to alert lenders to the financial state of a borrower in time to allow them to take appropriate action. Theory, however, may be different from practice. A study by Standard & Poor's of highly leveraged companies in western Europe suggests that as defaults have risen over the past 12 months, the time between a covenant

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