The claims that senior bankers have been using dangerous drugs are shocking, but the evidence appears irrefutable. Yes, cov-lite loans are growing:
This is going to have a nasty come down…
I think it’s more like the fact that most covenants are useless and people are gradually getting used to the fact.
Isn’t cov-lite just symptomatic of a demand for leverage to generate the needed returns? Cov-lite are essentially CLO source material. This is demand for bonds displacing demand for loans.
Credit quality would be better proxied by leverage and PIK\toggle structures
Further, the recent Moody’s piece titled High Yield Bubble Warning Signs Mount has a graph of Global Corporate PIK Bond Issuance. We’re back at April 2007 levels.
Oh cool, Carter. Now all I need is a nice (by which I mean of course deeply toxic) little synthetic low grade CLO to short the mezz of, and in a couple of years I will finally be able to buy my own island…
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