Private credit firms are drawing back on investor protections in order to access bigger deals, according to a report by Bloomberg that cites data from a recent Moody’s Investor Service report.
Quoting analysts familiar with the matter, the report said that private credit is dropping maintenance covenants in larger deals, referring to a type of investor protection that requires companies to periodically meet certain tests of financial health. Leveraged loans discarded the safeguards years ago and most are now considered ‘covenant-lite.’
According to the data cited in the report, direct lenders are following suit with only 7% of private credit loans larger than $500m in its analysis having maintenance covenants, compared to 67% of loans smaller than $250m.
