Covenant-Lite Loans

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DEFINITION of 'Covenant-Lite Loans'

A type of loan whereby financing is given with limited restrictions on the debt-service capabilities of the borrower. The issuance of covenant-lite loans means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income.

INVESTOPEDIA EXPLAINS 'Covenant-Lite Loans'

The evolution of covenant-lite loans can generally be traced to the historical buyout power of private equity groups performing highly leveraged buyouts. The power of these buyout groups led to the relaxation of loan restrictions, and arguably providing increased flexibility for repayment.

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  2. What are the major differences between investment banking and private equity?

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  3. What are some advantage of raising capital through private placement?

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  4. How are leveraged buyouts financed?

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  5. What are the different equity financing options available to companies in the United ...

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