Private Credit Deep Dives – Leverage Covenants And Auto-Resets

As the private credit industry has relentlessly expanded and the capital available for deployment by private credit asset managers has rapidly grown, those investing at the top end of the market have increasingly had to compete on terms with the financing packages offered by underwriting banks for broadly syndicated deals. Until the last two or three years, one of the key points of differentiation between a liquid loan and a private credit loan was that the former would likely be "cov-lite" (meaning there would be no financial maintenance covenant for the benefit of the term loan lenders) while the latter would generally require that at least a leverage-based maintenance covenant be included. That distinction has become less clear-cut and, whilst some private credit institutions continue to insist upon the inclusion of a maintenance covenant (including the significant majority of such institutions within the true mid-market), others have become increasingly