# Covenant-Lite

*Corporate Finance & M&A — Finicade finance glossary*

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.

**Also known as:** cov-lite, covenant lite loan

**Related terms:** [Covenant](https://finicade.com/glossary/covenant), [Term Loan B](https://finicade.com/glossary/term-loan-b), [Leveraged Buyout (LBO)](https://finicade.com/glossary/lbo), [Credit Risk](https://finicade.com/glossary/credit-risk), [Recovery Rate](https://finicade.com/glossary/recovery-rate)

Source: https://finicade.com/glossary/covenant-lite