Covenants crumble

Covenant-lite has reached a new high at the end of 2018, raising concerns about market risk.

The proportion of covenant-lite loans made increased to new highs in the second half of 2018, according to data from Debtwire.

Covenant-lite use increased rapidly between 2016 and 2017, rising from a minority of just 27 percent in the first half of 2016 to 77 percent by H1 2017.

While use of covenant-lite had remained relatively stable, it has jumped again in the second half of 2018, now up to 84 percent of institutional loans issued. Increasing risks in the market will be of concern to investors.