Fitch: European Leveraged Finance Highlight Showcases Light Covenant Trend
OREANDA-NEWS. Fitch Ratings says in its latest European Leveraged Finance Highlight that the trend towards lightly covenanted leveraged loan structures is now entrenched, reflecting a change in the investor base and their risk management practices.
Lightly covenanted leveraged loan transactions are currently the norm in Europe, having been that way for a few years in the U.S. In transactions to August 2015, just over 20% of leveraged loan transactions had a full set of covenants, defined by Fitch as three or four financial maintenance covenants, which is down 5pps from 2014, in Fitch's Credit Opinion database. This reflects the change to the investor base to more institutional investors that rely on market liquidity to manage risk as well as the supply and demand imbalance that tips negotiation power towards issuers.
Fitch's European Leveraged Finance Highlight series features trends in the high yield and leveraged finance markets with succinct analysis and the factors to watch in the near term.