Treasurers defend light lending rules

‘Covenant-lite’ loans, used particularly by private equity firms, have been
defended by the Association of Corporate Treasurers, who have said the loans are
not as risky as critics have made out.

‘Covenant-lite is not covenant-free. Such loans are heavily negotiated. Such
loans still have far more restrictions than an investment grade borrower would
normally agree to,’ said John Grout, policy and technical director at the ACT,
in a letter to the FT.

The loans have attracted attention from unions and politicians who have been
probing the private equity industry. Opponents of the industry have said the
‘cov-lite’ loans are risky and reckless and place companies and jobs at risk.

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