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Our Private Equity Group provides trusted counsel derived from deep industry knowledge to established as well as up-and-coming private equity firms. We represent firms of every size across the spectrum of investment strategies, and we build long-standing relationships with our clients. As active participants in the private equity industry, we are able to advise our clients on the latest innovations, as well as current market practices and trends.

September 2019 Private Equity Digest

September 23, 2019 Download PDF

Covenant-lite loans have surged in the last couple of years. In 2018, cov-lite loan volume in the US reached $911 billion, an approximate 26% increase over 2017, and accounting for 85% of leveraged loans in the U.S., the highest percentage on record.

Through August 2019, cov-lite loan volume in the US soared to approximately $940 billion, about 3% more than the total for 2018. As of August 31, 2019, close to 80% of all outstanding par leveraged loans were covenant lite.

In terms of market provisions, certain borrower-friendly provisions became even more borrower-favorable in 2018. Despite some pull- back in the fourth quarter of last year, the prevalence of this borrower-friendly environment is continuing into 2019.

Our Finance partner, Eric Goodison, and practice management counsel, Margot Wagner, review below some of the most common cov-lite provisions and pros and cons for lenders and borrowers. In our view, the current market remains favorable to PE sponsors borrowing under cov-lite terms.

© 2019 Paul, Weiss, Rifkind, Wharton & Garrison LLP

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