Further indicating that investors are now calling the shots on the credit markets, issuers are hotfooting to add covenants to recently launched leveraged loan deals.
Last week, Source Interlink, Vertrue, Van Houtte and Harlan Sprague Dawley were forced to add leverage maintenance covenants to their credit facilities, according to a report from Credit Suisse. Across the pond, England's Alliance Boots has also added covenants to its megadeal. And sources say these issuers likely won't be the only ones.
With the covenants added, however, investors are confident these deals, which are all acquisition financings, will close.
"In the past four weeks, the market has backed up big time," one investor said. "Covenant-lite is very out of favor currently, and the covenant-lite kind of structures we saw get done in the past are trading much more [bearishly] relative to their corporate structures. I would think given the general market demand for that type of paper, I'm not surprised they would add covenants."
Indeed, in a round of selling to hit the loan market early …
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