The last couple of years have caused us to rethink our usual approach to a covenant trends piece. Years of steady loan issuance lent themselves to year-on-year covenant erosion trend updates. But 2020 through 2022 turned the consistent pattern of trend updates on its head: first, the pandemic-driven slow down (albeit relatively brief) in 2020; then, a frenetic 2021 which abruptly came to a halt in 2022. Even though 2023 is unlikely to change the picture much, there were plenty of covenant updates in A&E Senior Facilities Agreements (“SFAs”) involving the ‘J.Crew blocker’.

Over the course of this report, we will look back at interesting trends in syndicated SFAs in the European leveraged loan market during 2022 and the first half of 2023. For purposes of covenant trends, we will focus primarily on 2022 (when we did still see some new deals) to give readers a reference point as to where the (new deal) market left off. In the first half, we will consider trends in pricing, documentation structure, financial calculations, and certain other features that may be of interest to market participants.

In the second part, we will consider key covenant trends, with a particular focus on debt incurrence, leakage through restricted payments and investments, asset leakage, and some additional observations from our review of A&E transactions during the first half of 2023.

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