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Market Extra: Here’s who keeps investors abreast of the opaque leveraged loan market and possible systemic risk

Investor protections in loan documents are deteriorating and global regulators are taking notice.

Amid this stepped-up scrutiny, research service Covenant Review has been sounding the alarm on covenants in loans issued to debt-laden companies since the 2008 recession.

Financial watchdogs say the deterioration in covenants required by lenders could result in steep losses for investors during an economic downturn and potentially lead to instability in the U.S. financial system.

“From the lenders’ perspective, it’s been a constant grind downward,” said Steven Miller, CEO for Covenant Review, in an interview with MarketWatch.

With a 20-person team of casually dressed lawyers, Covenant Review sifts through stacks of paper in the 10th floor of a Manhattan Midtown office, helping overwhelmed asset managers and investors see if loan covenants are watertight or watered down.

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