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Leveraged-Loan Protections Stubbornly Weak

Covenant-light loans still dominate the market, Moody's says.

By Cordell Eddings, Bloomberg | Updated on March 10, 2016

The good news is that investors will find slightly better protection on leveraged loans this year. The bad news, according to Moody’s Investors Service, is that loan covenants will remain categorically weak for a fourth straight year.

“Investors in today’s volatile market are being exposed to rising risk as they forfeit key levers traditionally available to them when a borrower is in financial distress,” Moody’s analysts lead by Enam Hoque wrote in a March 8 note to clients. Data “indicate that covenant protections remain stubbornly weak.”

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