Debt Explained, the leveraged finance data and analysis company, has launched the first of a new quarterly series of research reports on the leveraged loan market.
The inaugural report focuses on soft-call protections, which govern the charges payable to investors upon early redemption of their loans.
With the increasing use of cov-lite loans in Europe came the introduction of call protection for lenders of senior debt. But now borrowers and sponsors are increasingly negotiating exceptions to this concept of a payment for early repayment, eroding the standard protections available to the investor base for cov-lite.
Each report will feature a repeatable table of data concerning key covenant terms in new loan documents released during the previous three months.
Stephen Mostyn-Williams, Chairman of Debt Explained, said the programme is an easy way of sharing the firm’s unique insights into the market.
“We analyse new deals for our loan terms database, which is a valuable resource for both the buy and sell-side and for advisors. The updates are a way for us to showcase our vast stock of data in an "at a glance" format. They will allow us to share market developments in a timely way, highlighting key areas of interest or concern. We’re doing it on a quarterly basis so as to identify genuine trends: tracking the market over three months gives a broad enough snapshot to distinguish between blips and a meaningful change in behaviour.”
Commenting on the current report’s key findings on soft-call protections, CEO Polly Newport said the research underlines the need for investor vigilance on covenants.
“This information shows how important it is to take an informed approach to market developments. A cursory look at the issue of soft-call protections would give the impression of an investor-friendly shift, as their inclusion is actually increasing. It’s only when you delve deeper that you discover the carve-outs and exceptions that are creeping in, reducing the protections available to investors.”