easy · Private Credit & Debt documentation-covenants-terms
What is the risk to a lender of a 'Covenant-Lite' loan that lacks an ECF sweep?
- The borrower's interest rate would automatically reset to the risk-free rate.
- The lender would be forced to convert their debt into common equity.
- The borrower would be unable to make acquisitions.
- The borrower could remain highly leveraged until maturity even if it generates massive surplus cash flow.
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