Protections on risky loans are close to their worst ever levels, says Moody’s

The covenant quality of North American leveraged loans is close to its worst ever level as investors forfeit protections they may need if borrowers become distressed, Moody’s Investors Service said Thursday.

The credit rating agency is the latest to sound the alarm on a market worth about $1.4 trillion that some say is concentrating debt in a way that resembles the subprime lending mania that sparked the 2008 financial crisis.

In July, Moody’s Analytics Chief Economist Mark Zandi said the rise of the leveraged loan market—loans issued by companies that do not carry investment-grade ratings—is one of the few areas where investors are rightly concerned about excessive debt levels in the U.S.

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