During the past three years, so-called covenant-lite—or “cov-lite”—loans have come roaring back in the leveraged loan marketplace. In 2013, financial institutions issued more than $381 billion worth of these borrower-friendly loans, more than triple the amount issued in the gangbuster, prerecession days of 2007. This year looks just as promising: According to data tracker Dealogic, loan issuances recently hit $83.6 billion over 82 deals, up 41 percent from the same period in 2013 ($59.4 billion over 68 deals).
Favorable lending terms have now become ubiquitous in the leveraged loan market, with the trend trickling down from the bulge bracket to the middle market. In addition, this phenomenon is not only expanding throughout the U.S.—it is also going global, with European companies backed by private equity now beginning to tap in.
