Financial Times FT.com

Covenant ‘lite’ loans attract buy-out groups

By Paul J Davies in London

Published: April 10 2007 19:54 | Last updated: April 10 2007 19:54

Growing numbers of private equity groups are looking to protect their investments against a potential downturn by trying to strip out the covenants that protect lenders when businesses begin to underperform.

The US market for leveraged loans, which finance the buy-outs sponsored by private equity of companies that usually are or become non-investment grade, has seen huge growth in the volume of so-called “covenant-lite” deals.

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