Iosco warns of leveraged loan ‘vulnerabilities’

As recovery rates plummet, report calls for clearer covenants and more transparency on addbacks

loan recovery downwards money

Slack lending practices since the financial crisis are creating greater risks for investors in the leveraged loan market, according to a new report by the International Organisation of Securities Commissions.

Low interest rates and a shifting buyer base have “led to significant developments in market practices including the rise in covenant-lite leveraged loans, increasing complexity of loan documentation and the use of Ebitda adjustments which are often shown to be overly optimistic”, says the

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