Has the percentage of cov-lite and cov-loose leveraged loans increased or decreased over the past five years? How prevalent are amend-to-extend clauses? How severely restricted are loan transfers? Based on our analysis of 130 LSTA-style leveraged loan documents and over 200 CLO OMs, the answers may surprise you.

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We created a mock portfolio using 130 publicly available LSTA-style bilateral  first lien credit agreements. We used the Eigen NLP platform to unlock the unstructured information contained within these documents to see how this data can be used by organizations to help make informed decisions and kick-off documentation renegotiation processes or facilitate sell- and buy-side due diligence in this rapidly changing market environment. 

We examined covenant packages and covenant levels, equity cure rights and mandatory prepayment provisions aimed at limiting cash leakage. We also assessed maturity risk and the ability to extend existing arrangements, as well as  transferability  restrictions. 
 
Here are some of the key insights we gained:

In the Eigen mock portfolio, c.40% of loans were cov-lite and c.60% were cov-loose with only one credit agreement featuring a full covenant package.

c.30% of the analyzed credit agreements permitted equity cures, with just a handful of agreements prohibiting cures in consecutive quarters.

Almost half of the credit facilities had a built-in ECF sweep mechanism in place with the majority featuring a 50% initial ECF sweep percentage.

With an increased likelihood of defaults due to the significant market dislocation caused by COVID-19, it’s proving more critical than ever for lenders to perform an in-depth review of their leveraged loans portfolio.

Dr. Lewis Z. Liu

Co-founder and CEO Eigen Technologies

Dr. Simone Bohnenberger-Rich

Global Head of Financial Services
Eigen Technologies

Alexandra Zimenskaya

Credit Market Expert
Eigen Technologies

SPEAKERS:

ON DEMAND WEBINAR

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MANAGING YOUR CREDIT RISK:
How to use NLP to analyze your loan portfolio now

Can you answer the following questions about your portfolio?

  • What is the percentage of cov-lite vs cov-loose leveraged loans in your portfolio?
  • Which ones permit equity cures and how often?
  • Which ones have an amend-to-extend clause in place?
  • What restrictions you are facing on loan transfers? 
  • How have these trends changed over the last five years?

During the webinar, we share the results of our deep-dive into LSTA documents, giving lenders an indication of what to expect within their portfolios. So, if you’re a lender, you can better anticipate problems and start planning recalibration or renegotiation efforts. We also cover how we have gained these insights into our leveraged loans ‘mock portfolio’ using the Eigen NLP platform.

Watch this on-demand webinar to learn about the five key findings from our research and how NLP can prove a valuable tool for managing risks within your loan portfolio.

About this webinar

What we learned from the analysis of our mock portfolio

Want to discuss the findings further?

if you’re in Europe 

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If you would like a deeper dive on the analysis and a greater understanding of how we carried it out, we’d be happy to set up a dedicated meeting with a senior member of our 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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c.40% of agreements had an amend-to-extend clause in place allowing borrowers to extend existing arrangements instead of a full refinancing.

c.40% of loans featured a disqualified lender list provision restricting loan transfers to specific parties.

With an expected increase in waiver requests and new money needs, there is an opportunity for lenders to address weaknesses in the loan documentation. The first step in this process is getting to grips with the detail in your loan documents and by using the Eigen platform, we were able to extract this data in a fraction of the time it would take using manual processes and with a high degree of accuracy.

We saw a strong correlation between Cov-lite limit and Cov-lite leveraged loan issuance with declining percentages in the last two years, contrary to the prevailing market story

Average Cov-lite Limit (solid line) and prevalence of cov-lite in loan issuances (dotted line)

YoY Change in average Cov-lite Limit (solid line) and YoY chance in prevalence of cov-lite in loan issuances (dotted line)

YoY Change in average Cov-lite Limit (solid line) and YoY chance in prevalence of cov-lite in loan issuances (dotted line)
Average Cov-lite Limit (solid line) and prevalence of cov-lite in loan issuances (dotted line)

ON DEMAND WEBINAR ON NEW LEVERAGED LOANS ANALYSIS

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Managing Your Credit Risk