Leveraged loan lender protections weakening continues…

Written by Peter Washkowitz, Senior Director and Head of Americas Covenants ||

The dog days of summer did not slow down activity in the bankruptcy and restructuring world.

In the United States, August came to a close with a mix of real estate, healthcare and consumer services companies filing chapter 11, including Tix Corp., Brown Industries, Regional Housing & Community Services Corp., Advanced Tissue and New England Sports Village.

After the reduction of revolving commitments under its asset-backed lending facility in the wake of a pipeline leak at the Inglewood Oil Field, E&B Natural Resources may seek a replacement for the facility, while restructuring negotiations between Glass Mountain Pipline’s major stockholders have recently begun to gain momentum.

Meanwhile, with Ion Geophyiscal’s $7 million of 2021 notes maturing on Dec. 15, market participants continue to speculate on how the company will fund the notes’ repayment. Reorg’s Americas Covenants team has provided an updated tear sheet analysis of the credit, which is linked to below.

As fall is fast approaching, the prevalence of weak lender protections in the leveraged loan market appears to be running full steam ahead. Throughout the summer months, new credit agreements for publicly owned sponsored companies continue to include loose covenants and aggressive terms that provide significant flexibility to incur additional first lien debt, transfer assets to unrestricted subsidiaries and pay dividends.

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