Cov-lite will lead to lower recoveries – S&P

Covenant-lite loan agreements will lead to lower recoveries in the event of default, according to research published by Standard & Poor’s today.

The rating agency estimates recovery rates for cov-lite loans – where lenders give up some of the guarantees they have traditionally extracted from borrowers – are about 8–14% lower than for equivalent borrowers with full maintenance covenants.

“What makes a covenant-lite loan less protective than the loans traditionally made by professional bank lenders

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