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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RELATED FAQS
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    All securities offered to investors in the United States are required to comply with the anti-fraud provisions of federal ... Read Full Answer >>
  2. What are the major differences between investment banking and private equity?

    Private equity and investment banking both raise capital for investing purposes but tend to do so in very different ways. ... Read Full Answer >>
  3. What are some advantage of raising capital through private placement?

    Small businesses face the constant challenge of raising affordable capital to fund business operations. Equity financing ... Read Full Answer >>
  4. How are leveraged buyouts financed?

    A leveraged buyout (LBO) is a transaction in which the buyer borrows a significant portion of the requisite funds to purchase ... Read Full Answer >>
  5. What are the different equity financing options available to companies in the United ...

    Finding and attaining affordable financing is an ongoing challenge for most businesses within the United States. Debt financing ... Read Full Answer >>
  6. How do returns on private equity investments compare to returns on other types of ...

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