In this new analysis of over 200 European CLOs, we bring you detailed insights on the market share of covenant-lite loans and key influencing factors and trends.  

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NEW ANALYSIS

Covenant-lite trends in European CLOs

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Cov-lite loans are on the rise

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if you’re in Europe 

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Our full cov-lite analysis contains further insights into: 

  • The Cov-lite limits percentage 
  • Trends in the language of Cov-lite definition, including requirements for incurrence covenants, senior-secured, and cross-default provisions
  • Trends in credit rating requirements on cov-lite loans
  • Benchmarking of these trends against 40 CLO managers and 10 arranging banks

If you would like a deeper dive on the analysis and its implications, we’d be happy to set up a dedicated meeting with a member of our senior team. 

if you’re in North America 

A member of our team will be in touch to set up your appointment. 

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We used the Eigen platform to analyze more than 200 European collateralized loan obligations in order to understand how the prevalence of cov-lite loans in these CLOs has changed over time.

We found evidence to support the common perception that the risk profile of European CLOs has changed since 2010. Specifically, we found that:

The findings support the idea that whilst the CLO limit has gone up as cov-lite loans have become commonplace over the years, managers are increasingly finding ways to add protection against a lack of maintenance covenants.

This is the first comprehensive, publicly available analysis of CLOs using NLP technology. The full analysis – which is available on request – includes insights into the Cov-lite limits percentage, trends in credit rating requirements on cov-lite loans and more. We’ve summarised some of the key findings, which you can download below. 

Cov-lite limits have become the norm post-2010 - this was not mentioned before in OMs. 

From 2017 onwards, there has been a convergence on 30% as the standard cov-lite limit - up from the broader range of 20 – 25% in years prior. 

Since 2017, CLOs with a cov-lite limit of 35% or more are increasingly required to be senior-secured – this was not a requirement before.

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ON DEMAND WEBINAR:
BALANCING RISK - TRENDS IN CLOs AND WHAT THEY MEAN FOR MARKETS UNDER COVID-19

This on demand webinar explores some of the key findings from Eigen’s analysis of over 200 European CLOs - and what they might mean in the context of COVID-19. Featuring a presentation and discussion between Dr. Lewis Z. Liu, Eigen’s Co-Founder and CEO, and Dr. Simone Bohnenberger-Rich, Global Head of Financial Services at Eigen, this webinar will give you insights that will help you understand key cov-lite trends and better assess risk.

The live version of this webinar first took place on 20 May 2020.

Eigen’s co-founder and CEO, Dr Lewis Z Liu, explains the background to this analysis and why it matters.

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Breakdown of cov-lite limit % across analyzed CLOs

% OF EUR CLOs PER LEVEL PER YEAR

The analysis shows that Cov-lite limits have increased and converged on 30%.

Insights from our cov-lite analysis