Covenant-Lite
Also called: cov-lite, covenant lite loan
Covenant-lite loans drop maintenance covenants, leaving lenders with no quarterly tripwire and no early seat at the table. They now dominate the leveraged loan market, a direct consequence of borrower-friendly credit conditions. The consequence appears in downturns: problems surface later, at a worse stage, and recovery rates on cov-lite defaults have been meaningfully lower.