Covenantive Easing (Last of a Series)

As we wrap up our special series on how credit agreement terms are eroding, we asked our distinguished team of lawyers from Morgan Lewis: What should we expect, as issuers and credit providers, to come up in deals with financial covenants?

“Financial maintenance covenants are often included in loan documents, even in larger deals,” said Matthew Schernecke. “They’re frequently set at 25%-40% cushions to a sponsor’s model. It’s becoming unusual to see significant step-downs in financial covenant levels over the loan term...

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Quote of the Week

“There is a lot of noise in the market and rates are reflecting that.” – Nick Maroutsos, co-head of global bonds, Janus Henderson Investors.

What’s Your Favorite Quote of the Week?

Featuring Charts

Chart of the Week: Face Time

June 20, 2019

The share of financings with a covenant requiring a management meeting rose last year.

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Chart of the Week: Freer and Clearer

June 13, 2019

The share of loans with free and clear grower components climbed to a record high in the three months through May 2019.

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Chart of the Week: Sunset Time

June 6, 2019

The vast majority of “most-favored nation” provisions in loan agreements are gone after 12-18 months.

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Chart of the Week: Doc Holiday

May 30, 2019

Lender protection, as measured by composite documentation scores, continues to weaken.

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Chart of the Week: Going Direct

May 22, 2019

Two-thirds of all middle market LBOs are being financed by direct lenders, from zero in 2013.

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Chart of the Week: Cash to Burn

May 16, 2019

Direct lending supply and demand is driven by increasing amounts of dry powder.

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Features

The Pulse of Private Equity – 6/17/2019

Eight consecutive years in the black? Download PitchBook’s Report here. Private equity net cash flows are on pace for an eighth consecutive year in positive territory. Through Q3 2018 (the most recent data available), net cash flows (the difference between contributions and distributions) remained just above $100 billion. One more quarter’s worth of data to sift

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Leveraged Loan Insight & Analysis – 6/17/2019

US CLO distribution of defaulted loans by sector In May, the top sectors of defaulted loans held within active CLOs on a volume basis were Healthcare, Telecommunications and Technology. One-hundred and thirty-two CLOs currently hold defaulted Healthcare debt, 163 CLOs hold defaulted Telecom debt and 83 CLOs hold defaulted debt in Technology....

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Private Debt Intelligence – 6/17/2019

North America-Focused Private Debt The private debt market has grown rapidly in recent years, and North America and Europe account for the majority of that expansion. Based on the latest Preqin Investor Outlook report, 68% of investors believe the US presents the most favourable opportunities in private debt in 2019....

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PDI Picks – 6/17/2019

AUM growth expectations at odds with consolidation trend Many private markets managers expect rapid growth in the coming years, but some of those optimistic firms may find themselves being bought – just ask some BDC managers. One of the marquee stories in the finance world post-global financial crisis has been the rise of alternative assets.

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Leveraged Loan Insight & Analysis – 6/10/2019

Loan mutual fund AUM continued to decline, ending May at US$137bn Loan retail outflows sent the AUM (market value) for loan mutual funds & ETFs lower to US$137.7bn as of the end of May, a decline of US$1.92bn or -1.4% month on month, and US$9.9bn or -7% since the beginning of the year.  Loan funds’

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Middle Market Deal Terms at a Glance

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Special Report: Why Valuations Matter

June 13, 2019

Beginning in April 2019 The Lead Left published a series of articles on valuations. This report consolidates those articles.

Special Report: Leveraged Loans and Systemic Risk

April 24, 2019

Beginning in February 2019 The Lead Left published a series of articles on leveraged loans and systemic risk. This report consolidates those articles.

State of the Capital Markets – First Quarter 2019 Review and Second Quarter 2019 Outlook

April 11, 2019

Review of Current Market Conditions/ Analysis of Capital Markets Metrics/ Review of Credit Quality/ Outlook for Second Quarter 2019