As part of our developing content offering, we are publishing our debut quarterly round-up analytical report on covenant trends. We welcome feedback from our subscribers on what topics you would like to see covered in future reports. 

With market conditions buoyant, March saw its fair share of aggressive and unusual covenant features hit the market. Though there were reports of initial pushback on deals with the most sponsor-friendly covenant terms (particularly Ahlstrom-Munksjö and Foncia), ultimately high demand enabled these deals to sail through relatively unscathed.

Given the incredible flexibility we’ve been seeing across the board, we could have focused this debut quarterly covenant report on nearly any area and shown a similar theme of continued covenant loosening. This is all the more remarkable as issuers have continued to suffer the effects of Covid-19, which one might be excused for imagining would have helped to rein in some of the flexibility in the drafting. 

In our first quarterly covenant report, we focus on capacity for value leakage away from the Restricted Group via Restricted Payments (RPs) and Permitted Investments (PIs), drawing on data from 9fin’s Covenant Capacity beta tool, and take a look at how the most recent batch of sponsor deals stack up versus the 2020 headliners.