Private equity raises ‘covenant-lite’ loans

By Gillian Tett in London-FT.com
Published: March 19 2007 22:03 Last updated: March 19 2007 22:03
Two private equity groups have taken a striking new step to protect themselves from any future downturn in the credit cycle by raising loans that remove most lenders’ rights for the first time in Europe.
The “covenant-lite” loan – or “cov-lite” – looks like a traditional syndicated loan but does not carry the legal clauses that allow investors to track the performance of a risky borrower or declare a default if financial measures are breached.