Return of cov-lite means return of risk

By Olivier Holmey
03 Apr 2014

The resurgence of covenant-lite loan issuance in Europe bears much resemblance to the pre-crisis craze for loose terms on risky debt. It may benefit borrowers, but in the long run both banks and investors risk paying the price of repeating errors past.

Ceva Santé Animale has become the first company to sign a new euro-only loan without a single maintenance covenant. The absence of such covenants increases the company’s autonomy in the capital markets, but greatly reduces lenders’ oversight of its activities.

Other borrowers will emulate Ceva. Diana Ingredients, a ...

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