Looser loan terms clear way for more ‘c-on-c violence’

Creditor-on-creditor fighting likely to build, as carve-outs for struggling borrowers get wider

A feature in leveraged loan documents used by struggling borrowers to raise new debt has been getting looser, data shows. Lawyers say it will lead to an upsurge in so-called creditor-on-creditor violence, where groups of lenders clash over the extension of new financing to troubled companies.

Average exceptions to covenants – known as baskets – that borrowers can exploit to raise more funding have grown larger, even as borrowing costs have risen, data from Covenant Review shows. 

The exceptions