The document summarizes concerns from Standard & Poor's about rising levels of covenant-lite loans, particularly 'B' rated loans. There has been a large increase in covenant-lite issuance in recent years, with over half of 2014 covenant-lite loans being 'B' rated. While covenant-lite loans have historically seen slightly lower defaults, recoveries are also slightly lower. If economic conditions deteriorate, default rates for covenant-lite and traditional loans could spike above past crisis levels, especially for 'B' rated loans which have higher inherent risk. The proliferation of risky 'B' rated covenant-lite loans leaves borrowers vulnerable if a future liquidity crisis restricts refinancing options.
The document discusses how specialty finance firms have filled gaps in credit availability left by major banks since the recession. Specialty finance provides credit to consumers and small businesses through non-traditional means. It plays a critical role by extending credit to higher risk borrowers who cannot access capital through traditional banks. The document outlines different types of specialty finance like consumer loans, asset-based lending, and crowd funding that provide alternative sources of capital for borrowers and investment opportunities.
Commercial Real Estate Loan Workouts- A Basic Overviewclonstein
- The document provides an overview of commercial real estate loan workouts, which are becoming more common as commercial loans default at higher rates due to the economic downturn.
- It outlines key steps for lenders in the workout process, including properly documenting the default, assessing options like restructuring or foreclosure, analyzing loan documentation and collateral perfection, and obtaining a current property valuation.
- The goal is to help lenders make informed decisions about workouts versus pursuing other remedies like foreclosure, based on factors like the property value relative to debt and the ease of liquidating the collateral.
This document discusses how exotic financial instruments like CMOs, POs, IOs, and CDS contributed to the 2007-2009 financial crisis. CMOs and MBS fueled demand for mortgages, leading to lower credit standards and risky subprime loans. POs and IOs allowed investors to bet on or hedge against mortgage prepayments but increased exposure to default risk. CDS were used like insurance on MBS but sellers failed to reserve properly against losses. Together these instruments obscured risk and spread it widely, facilitating the growth of a mortgage bubble that burst and caused the financial crisis when subprime loans defaulted.
This white paper discusses the risks to banks and the fragile economy from rising corporate defaults and bankruptcies. It notes that 30% of commercial loans have documentation defects that could cause banks to lose collateral. The paper predicts $3-5 trillion in commercial real estate and corporate loan defaults through 2013, many resulting in bankruptcies. It argues that banks need new risk management tools to protect collateral and recoveries from defaulted loans to maintain capital levels and avoid insolvency. UCC insurance is presented as a tool that can help banks mitigate risks to collateral on commercial loans.
If you are a commercial realtor and you have clients that have been turned down by a bank you should check out this presentation. If you are interested in having your deal funded by private money please contact Megan Krache at mkrache@sensiblelendingsolutions.com. We are actively lending to people the banks have turned down and are able to lend to people/businesses that have losses on their tax returns.
How Resilient are MBS to CDO Market Disruptionsfinancedude
The document discusses the link between collateralized debt obligations (CDOs) and the primary mortgage-backed securities (MBS) market. It explains that CDOs were large purchasers of junior MBS tranches, providing funding that supported over $1 trillion in MBS issuance. If CDOs withdraw from this market, it could severely restrict funding for new home loans. The document recommends tighter regulation and disclosure to address risks and protect certain investors from high-risk mortgage products and securities.
The document discusses how to navigate banking relationships during troubled economic times. It provides an overview of the shifts in the banking industry due to the financial crisis, including increased consolidation and losses from mortgage-backed securities and credit default swaps. It then offers advice on evaluating your bank's health, communicating proactively with your banker, understanding your loan terms and knowing when to seek other options.
This document discusses the risks that commercial mortgage-backed securities (CMBS) investors face from distressed commercial real estate loans and properties within CMBS deals. It provides an example of how the distressed loan on the Three Columbus Circle property in New York City resulted in a $250 million prepayment that reduced returns for senior CMBS bondholders. The document analyzes actual CMBS deal data to estimate potential prepayments and losses from problem loans and properties in special servicing. By understanding these risks, CMBS investors can better evaluate deals and manage their portfolios.
The document discusses how specialty finance firms have filled gaps in credit availability left by major banks since the recession. Specialty finance provides credit to consumers and small businesses through non-traditional means. It plays a critical role by extending credit to higher risk borrowers who cannot access capital through traditional banks. The document outlines different types of specialty finance like consumer loans, asset-based lending, and crowd funding that provide alternative sources of capital for borrowers and investment opportunities.
Commercial Real Estate Loan Workouts- A Basic Overviewclonstein
- The document provides an overview of commercial real estate loan workouts, which are becoming more common as commercial loans default at higher rates due to the economic downturn.
- It outlines key steps for lenders in the workout process, including properly documenting the default, assessing options like restructuring or foreclosure, analyzing loan documentation and collateral perfection, and obtaining a current property valuation.
- The goal is to help lenders make informed decisions about workouts versus pursuing other remedies like foreclosure, based on factors like the property value relative to debt and the ease of liquidating the collateral.
This document discusses how exotic financial instruments like CMOs, POs, IOs, and CDS contributed to the 2007-2009 financial crisis. CMOs and MBS fueled demand for mortgages, leading to lower credit standards and risky subprime loans. POs and IOs allowed investors to bet on or hedge against mortgage prepayments but increased exposure to default risk. CDS were used like insurance on MBS but sellers failed to reserve properly against losses. Together these instruments obscured risk and spread it widely, facilitating the growth of a mortgage bubble that burst and caused the financial crisis when subprime loans defaulted.
This white paper discusses the risks to banks and the fragile economy from rising corporate defaults and bankruptcies. It notes that 30% of commercial loans have documentation defects that could cause banks to lose collateral. The paper predicts $3-5 trillion in commercial real estate and corporate loan defaults through 2013, many resulting in bankruptcies. It argues that banks need new risk management tools to protect collateral and recoveries from defaulted loans to maintain capital levels and avoid insolvency. UCC insurance is presented as a tool that can help banks mitigate risks to collateral on commercial loans.
If you are a commercial realtor and you have clients that have been turned down by a bank you should check out this presentation. If you are interested in having your deal funded by private money please contact Megan Krache at mkrache@sensiblelendingsolutions.com. We are actively lending to people the banks have turned down and are able to lend to people/businesses that have losses on their tax returns.
How Resilient are MBS to CDO Market Disruptionsfinancedude
The document discusses the link between collateralized debt obligations (CDOs) and the primary mortgage-backed securities (MBS) market. It explains that CDOs were large purchasers of junior MBS tranches, providing funding that supported over $1 trillion in MBS issuance. If CDOs withdraw from this market, it could severely restrict funding for new home loans. The document recommends tighter regulation and disclosure to address risks and protect certain investors from high-risk mortgage products and securities.
The document discusses how to navigate banking relationships during troubled economic times. It provides an overview of the shifts in the banking industry due to the financial crisis, including increased consolidation and losses from mortgage-backed securities and credit default swaps. It then offers advice on evaluating your bank's health, communicating proactively with your banker, understanding your loan terms and knowing when to seek other options.
This document discusses the risks that commercial mortgage-backed securities (CMBS) investors face from distressed commercial real estate loans and properties within CMBS deals. It provides an example of how the distressed loan on the Three Columbus Circle property in New York City resulted in a $250 million prepayment that reduced returns for senior CMBS bondholders. The document analyzes actual CMBS deal data to estimate potential prepayments and losses from problem loans and properties in special servicing. By understanding these risks, CMBS investors can better evaluate deals and manage their portfolios.
This document provides an overview of the X 430.611 course on credit markets. The course will cover macroeconomic and microeconomic aspects of credit, including various credit instruments, markets, and firm-level and consumer credit decisions. It will examine bubbles, bank runs, liquidity crises and defaults from both market and individual perspectives. The slides that follow provide examples of class content, including the importance of credit, capital structures, how credit is priced based on risk, and mechanisms like securitization that distribute credit risk. The course also examines the dark side of debt through topics like how leverage can inflate bubbles and how excessive leverage can distort the economy.
The less transparent, often misunderstood high yield municipal bond sector offers not only unusually high tax exempt income, but a mostly unrecognized source of long run diversification with the taxable high grade (re what the Fed says and does) bond market.
1) Subprime loans are loans given to borrowers who do not qualify for prime interest rates due to poor credit histories, with lenders charging higher rates to offset the increased risk.
2) Mortgage-backed securities fueled the growth of the subprime market by allowing lenders to sell mortgages to investors. However, rising default rates caused the value of these securities to drop, damaging investors and the financial institutions that held them.
3) The subprime crisis began in 2007 when falling home prices and rising interest rates caused many subprime borrowers to default on their loans, with the effects rippling through global markets.
DFA Federal Deposit Insurance Reform - PaperStephanie Bohn
Dr. Scott Hein, Professor of Finance and faculty director of the Texas Tech School of Banking, presented his research at the fourth annual Federal Reserve System/ Conference of State Bank Supervisors Community Banking in the 21st Century Research and Policy Conference at the Federal Reserve Bank of St. Louis.
1. The document discusses subprime lending, which offers loans at above-prime interest rates to borrowers with poor credit histories.
2. It describes various types of subprime mortgages like interest-only loans and adjustable rate loans.
3. It outlines the participants in the subprime market like lenders, brokers, and investors and discusses benefits to each group.
U.S. Lending Industry Meets Mortgage Process as a ServiceCognizant
In a challenging and changing market, mortgage process as a service, orMPaaS, can provide banks with the talent and systems to handle essen¬tial lending services, enabling them to focus on rebuilding their business through product innovation to capture market share.
This document discusses regulatory provision and loan classification standards as well as accounting provision vs regulatory reserve. It provides details on the different loan classification categories (pass, special mention, substandard, doubtful, loss) and the typical overdue periods and provisioning requirements for each. It also explains accounting provision under IAS 39, which requires evidence of loan impairment, and regulatory reserves, which take a more forward-looking approach. Basel II standards introduced the concepts of probability of default, loss given default, and exposure at default to calculate expected and unexpected losses. Banks must provision for expected losses and hold capital reserves to cover unexpected losses.
This document discusses interest-only mortgages in the UK, specifically those without a known repayment vehicle. It finds that about a quarter of new mortgages are interest-only, and around 17% of first-time buyers choose this option. However, analysis shows that interest-only borrowers typically have similar or higher incomes than capital repayment borrowers, suggesting affordability is not the main driver. While some interest-only borrowers may be using lump-sum repayments or home price appreciation to repay the principal, overall motivations remain unclear without further research. The Financial Services Authority has expressed concern about the volumes of interest-only lending without plans for repayment.
2011 Issue 1 - Bright Future Non Profit Financingwienkc
The document discusses the changing landscape of non-profit financing since the 2008 financial crisis, with traditional variable rate demand bonds (VRDBs) being replaced by simpler fixed-rate and variable-rate loans directly from banks. It also notes the benefits that non-profits have seen from increased competition among banks, which has led to lower borrowing costs. The document recommends that non-profits pursue competitive bidding processes when obtaining financing to ensure they receive the most favorable terms.
RECOURSE VS NON RECOURSE FOR COMMERCIAL REAL ESTATE FINANCINGLynn Aziz
This document summarizes the key differences between recourse and nonrecourse commercial real estate loans. Recourse loans offer more flexibility in pricing and structure but involve personal liability, while nonrecourse loans eliminate personal liability but impose constraints like escrow accounts. The document examines factors like loan characteristics, flexibility, ongoing management, and liability for investors to consider when determining the best loan type for their needs and investment objectives.
This document summarizes the key events that led to the subprime mortgage crisis and current financial crisis. It describes how subprime mortgages were originated and then securitized into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). These securities became highly complex and opaque. When the housing market declined, many subprime borrowers defaulted, causing the value of MBS and CDOs to plummet. This impaired the balance sheets of financial institutions and froze credit markets. The document outlines various experts' proposals to remedy the crisis, including government purchases of toxic assets, capital injections into banks, and establishing funds to remove bad assets from banks and resolve insolvent institutions.
The document provides an overview of the X 430.611 credit course, which covers commercial, personal, and global credit from macroeconomic and firm-level perspectives. The course examines various credit instruments and markets, credit decisions, bubbles and crises, and more. It presents sample class content on topics like the importance of credit, capital structure, loan types, money markets, bonds, credit ratings, and credit derivatives.
The document discusses the bankruptcy of Energy Future Holdings, which underwent the largest leveraged buyout in history. It accumulated $40 billion in debt and has now filed for bankruptcy. There is currently a legal dispute over where the bankruptcy proceedings will take place. The bankruptcy could help clarify fraudulent transfer law, as creditors may argue the leveraged buyout constituted a fraudulent transfer. Leveraged buyouts involve taking on substantial debt, making the acquiring company vulnerable if it cannot service the debt. Careful target selection is important to mitigate bankruptcy risk.
The document provides an overview of the 2007-2008 US subprime mortgage crisis. It discusses how subprime lending grew rapidly in the 2000s, fueling a housing boom. However, rising defaults caused many subprime lenders to fail as home prices declined. This impacted broader financial markets through securities like collateralized debt obligations that contained subprime mortgages. Government agencies intervened to support refinancing for at-risk homeowners to mitigate fallout from the crisis.
The document provides an overview of the Las Vegas office market for the 4th quarter of 2009. Key points include:
- Overall vacancy rates increased to 20.79% in the 4th quarter, up from 20.5% in the 3rd quarter and higher than the 16.7% rate from a year ago.
- Average rental rates declined to $2.10 per square foot from $2.12 last quarter, and were lower than rates from a year ago.
- Net absorption was negative at -80,478 square feet absorbed for the quarter. The economic outlook remains uncertain due to tight credit and high unemployment.
- By property class, top tier buildings
11.[49 61]trends of trade credit use among quoted firms in nigeriaAlexander Decker
This document summarizes a study that examines trends in trade credit use among quoted firms in Nigeria from 2000-2009. The key findings are:
1) There was significant variation and inconsistency in how Nigerian quoted firms utilized trade credit over the study period.
2) The low utilization of trade credit and alternative financing sources by most Nigerian firms suggests they have weak financial status.
3) Stakeholders need to encourage greater use of trade credit by firms and develop solid alternative financing options.
The global financial crisis began with the bursting of the US housing bubble and high default rates on subprime mortgages, which major banks had invested heavily in. When the housing market collapsed, these banks reported over $435 billion in losses. India was impacted through reductions in foreign institutional investment as these funds were called back overseas. This removed excess liquidity from the Indian economy and led to a slowdown. Small and medium enterprises have faced declining demand and difficulties obtaining financing. Infrastructure projects remain important for growth, but overall the economy has slowed significantly due to reduced foreign investment.
1) The document discusses the events leading up to the 2007-2008 financial crisis, including the rise of subprime mortgages, collateralized debt obligations (CDOs), and credit default swaps (CDS).
2) It describes how losses in the subprime mortgage market led to the collapse of Bear Stearns in 2008 and how the Federal Reserve intervened to prevent further damage.
3) Key events that exacerbated the crisis included the bankruptcies of Lehman Brothers and the rescue of insurance giant AIG by the Federal Reserve.
Mrotek Schmitz 2010 Cas Annual Meeting Finalkylemrotek
The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
China’s turning to “tough gradualism” in discipling local government borrowin...Terry Zhang
HONG KONG, 17 Jan 2018. Pengyuan International has released a research report, titled “China’s Turning To “Tough Gradualism” In Disciplining Local Government Borrowing Foretells Higher Risk of LGFV Default”. This research report is accessible via the link: http://www.pyrating.com/CreditResearch.
The first default on public bond of local government financing vehicles in China (LGFVs) could possibly happen in 2018, although the odds are still less than 50% according to a report published today by Pengyuan International titled “China’s Turning To ‘Tough Gradualism’ In Discipling Local Government Borrowing Foretells Higher Risk of LGFV Default”.
The central government of China launched recently a three-year critical battle against financial risks. Allowing LGFV default (“shock therapy”) may become a policy choice to dispel investor belief in implicit government support to LGFVs and thus help tame hidden local government borrowing, which occurred primarily through LGFVs.
“We believe Chinese government is turning to ‘tough gradualism’ rather than “shock therapy” in disciplining local government borrowing”, said Liang Zhong, analyst of Pengyuan International, “in another word, the central government is likely to tighten relevant discipline gradually, bearing in mind the needs to balance between achieving growth target and securing financial stability”.
The report argues that the “tough gradualist approach” means some type of credit events could happen before the others. For instance, the first default on public bond by LGFV sector in onshore market is likely to precede LGFV default on public bond in offshore.
As the risk of LGFV default rises, greater scrutiny of LGFV creditworthiness becomes increasingly necessary, including scrutinizing provincial economic and fiscal data according to the report.
“If China’s central government adheres to ‘tough gradualism’, namely tightening discipline steadily over local government borrowing, there it is good chance that the once relentless hidden LGT borrowing could be tamed markedly within three years.” Said Mr. Zhong.
ANALYSTS CONTACT
Mr. Liang Zhong
+852 3596 6140
liang.zhong@pyrating.com
MEDIA CONTACT
media@pyrating.com
OTHER ENQUIRIES
contact@pyrating.com
The document summarizes the origins and spread of the 2007-2009 financial crisis. Key factors included the rise of subprime lending during the housing boom, deregulation of the banking industry, and the growth of complex financial instruments like securitization of subprime mortgages, collateralized debt obligations, and credit default swaps, which spread risk but lacked transparency and regulation. These issues led to a collapse in the housing market starting in 2005 and the full crisis in 2007-2008.
Startups in a Down Economy: Legal, Business, and Financing Strategiesideatoipo
This document provides an overview of legal issues that may arise for businesses during an economic downturn or recession. It discusses force majeure clauses, impracticality defenses, and business interruption insurance that may apply if a company cannot fulfill its contractual obligations due to a recession. It also covers alternative financing options, debt restructuring, cancellation of indebtedness income, and fiduciary duties of management. The presentation aims to help businesses navigate legal responsibilities and mitigate risks in a difficult economy.
This document provides an overview of the X 430.611 course on credit markets. The course will cover macroeconomic and microeconomic aspects of credit, including various credit instruments, markets, and firm-level and consumer credit decisions. It will examine bubbles, bank runs, liquidity crises and defaults from both market and individual perspectives. The slides that follow provide examples of class content, including the importance of credit, capital structures, how credit is priced based on risk, and mechanisms like securitization that distribute credit risk. The course also examines the dark side of debt through topics like how leverage can inflate bubbles and how excessive leverage can distort the economy.
The less transparent, often misunderstood high yield municipal bond sector offers not only unusually high tax exempt income, but a mostly unrecognized source of long run diversification with the taxable high grade (re what the Fed says and does) bond market.
1) Subprime loans are loans given to borrowers who do not qualify for prime interest rates due to poor credit histories, with lenders charging higher rates to offset the increased risk.
2) Mortgage-backed securities fueled the growth of the subprime market by allowing lenders to sell mortgages to investors. However, rising default rates caused the value of these securities to drop, damaging investors and the financial institutions that held them.
3) The subprime crisis began in 2007 when falling home prices and rising interest rates caused many subprime borrowers to default on their loans, with the effects rippling through global markets.
DFA Federal Deposit Insurance Reform - PaperStephanie Bohn
Dr. Scott Hein, Professor of Finance and faculty director of the Texas Tech School of Banking, presented his research at the fourth annual Federal Reserve System/ Conference of State Bank Supervisors Community Banking in the 21st Century Research and Policy Conference at the Federal Reserve Bank of St. Louis.
1. The document discusses subprime lending, which offers loans at above-prime interest rates to borrowers with poor credit histories.
2. It describes various types of subprime mortgages like interest-only loans and adjustable rate loans.
3. It outlines the participants in the subprime market like lenders, brokers, and investors and discusses benefits to each group.
U.S. Lending Industry Meets Mortgage Process as a ServiceCognizant
In a challenging and changing market, mortgage process as a service, orMPaaS, can provide banks with the talent and systems to handle essen¬tial lending services, enabling them to focus on rebuilding their business through product innovation to capture market share.
This document discusses regulatory provision and loan classification standards as well as accounting provision vs regulatory reserve. It provides details on the different loan classification categories (pass, special mention, substandard, doubtful, loss) and the typical overdue periods and provisioning requirements for each. It also explains accounting provision under IAS 39, which requires evidence of loan impairment, and regulatory reserves, which take a more forward-looking approach. Basel II standards introduced the concepts of probability of default, loss given default, and exposure at default to calculate expected and unexpected losses. Banks must provision for expected losses and hold capital reserves to cover unexpected losses.
This document discusses interest-only mortgages in the UK, specifically those without a known repayment vehicle. It finds that about a quarter of new mortgages are interest-only, and around 17% of first-time buyers choose this option. However, analysis shows that interest-only borrowers typically have similar or higher incomes than capital repayment borrowers, suggesting affordability is not the main driver. While some interest-only borrowers may be using lump-sum repayments or home price appreciation to repay the principal, overall motivations remain unclear without further research. The Financial Services Authority has expressed concern about the volumes of interest-only lending without plans for repayment.
2011 Issue 1 - Bright Future Non Profit Financingwienkc
The document discusses the changing landscape of non-profit financing since the 2008 financial crisis, with traditional variable rate demand bonds (VRDBs) being replaced by simpler fixed-rate and variable-rate loans directly from banks. It also notes the benefits that non-profits have seen from increased competition among banks, which has led to lower borrowing costs. The document recommends that non-profits pursue competitive bidding processes when obtaining financing to ensure they receive the most favorable terms.
RECOURSE VS NON RECOURSE FOR COMMERCIAL REAL ESTATE FINANCINGLynn Aziz
This document summarizes the key differences between recourse and nonrecourse commercial real estate loans. Recourse loans offer more flexibility in pricing and structure but involve personal liability, while nonrecourse loans eliminate personal liability but impose constraints like escrow accounts. The document examines factors like loan characteristics, flexibility, ongoing management, and liability for investors to consider when determining the best loan type for their needs and investment objectives.
This document summarizes the key events that led to the subprime mortgage crisis and current financial crisis. It describes how subprime mortgages were originated and then securitized into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). These securities became highly complex and opaque. When the housing market declined, many subprime borrowers defaulted, causing the value of MBS and CDOs to plummet. This impaired the balance sheets of financial institutions and froze credit markets. The document outlines various experts' proposals to remedy the crisis, including government purchases of toxic assets, capital injections into banks, and establishing funds to remove bad assets from banks and resolve insolvent institutions.
The document provides an overview of the X 430.611 credit course, which covers commercial, personal, and global credit from macroeconomic and firm-level perspectives. The course examines various credit instruments and markets, credit decisions, bubbles and crises, and more. It presents sample class content on topics like the importance of credit, capital structure, loan types, money markets, bonds, credit ratings, and credit derivatives.
The document discusses the bankruptcy of Energy Future Holdings, which underwent the largest leveraged buyout in history. It accumulated $40 billion in debt and has now filed for bankruptcy. There is currently a legal dispute over where the bankruptcy proceedings will take place. The bankruptcy could help clarify fraudulent transfer law, as creditors may argue the leveraged buyout constituted a fraudulent transfer. Leveraged buyouts involve taking on substantial debt, making the acquiring company vulnerable if it cannot service the debt. Careful target selection is important to mitigate bankruptcy risk.
The document provides an overview of the 2007-2008 US subprime mortgage crisis. It discusses how subprime lending grew rapidly in the 2000s, fueling a housing boom. However, rising defaults caused many subprime lenders to fail as home prices declined. This impacted broader financial markets through securities like collateralized debt obligations that contained subprime mortgages. Government agencies intervened to support refinancing for at-risk homeowners to mitigate fallout from the crisis.
The document provides an overview of the Las Vegas office market for the 4th quarter of 2009. Key points include:
- Overall vacancy rates increased to 20.79% in the 4th quarter, up from 20.5% in the 3rd quarter and higher than the 16.7% rate from a year ago.
- Average rental rates declined to $2.10 per square foot from $2.12 last quarter, and were lower than rates from a year ago.
- Net absorption was negative at -80,478 square feet absorbed for the quarter. The economic outlook remains uncertain due to tight credit and high unemployment.
- By property class, top tier buildings
11.[49 61]trends of trade credit use among quoted firms in nigeriaAlexander Decker
This document summarizes a study that examines trends in trade credit use among quoted firms in Nigeria from 2000-2009. The key findings are:
1) There was significant variation and inconsistency in how Nigerian quoted firms utilized trade credit over the study period.
2) The low utilization of trade credit and alternative financing sources by most Nigerian firms suggests they have weak financial status.
3) Stakeholders need to encourage greater use of trade credit by firms and develop solid alternative financing options.
The global financial crisis began with the bursting of the US housing bubble and high default rates on subprime mortgages, which major banks had invested heavily in. When the housing market collapsed, these banks reported over $435 billion in losses. India was impacted through reductions in foreign institutional investment as these funds were called back overseas. This removed excess liquidity from the Indian economy and led to a slowdown. Small and medium enterprises have faced declining demand and difficulties obtaining financing. Infrastructure projects remain important for growth, but overall the economy has slowed significantly due to reduced foreign investment.
1) The document discusses the events leading up to the 2007-2008 financial crisis, including the rise of subprime mortgages, collateralized debt obligations (CDOs), and credit default swaps (CDS).
2) It describes how losses in the subprime mortgage market led to the collapse of Bear Stearns in 2008 and how the Federal Reserve intervened to prevent further damage.
3) Key events that exacerbated the crisis included the bankruptcies of Lehman Brothers and the rescue of insurance giant AIG by the Federal Reserve.
Mrotek Schmitz 2010 Cas Annual Meeting Finalkylemrotek
The rise and fall of subprime mortgage securitizations contributed in part to the ensuing credit crisis
and financial crisis of 2008. Some participants in the subprime-mortgage-backed securities market relied at least
in part on analyses grounded in the loss development factor (LDF) method, and many did not conduct their own
credit analyses, relying instead on the work of others such as securities brokers and rating agencies. In some
cases, the parties providing these analyses may have lacked the independence, or at least the appearance of it, that
would have likely better served the market.
A new appreciation for the value of independent analysis is clearly a silver lining and an important lesson to be
taken from the crisis. Actuaries are well positioned to lend assistance to the endeavor.
Mortgages are long-duration assets and, similarly, mortgage credit losses are relatively long-tailed. As casualty
actuaries are aware, the LDF method has inherent limitations associated with immature development. The
authors in this paper will cite examples of parties relying on the LDF or similar methods for projecting subprime
mortgage credit losses, highlight the limitations of relying exclusively on such methods for projecting subprime
mortgage credit performance, and conclude by offering general enhancements for an improved approach that
considers the underwriting characteristics of the underlying loans as well as economic factors.
China’s turning to “tough gradualism” in discipling local government borrowin...Terry Zhang
HONG KONG, 17 Jan 2018. Pengyuan International has released a research report, titled “China’s Turning To “Tough Gradualism” In Disciplining Local Government Borrowing Foretells Higher Risk of LGFV Default”. This research report is accessible via the link: http://www.pyrating.com/CreditResearch.
The first default on public bond of local government financing vehicles in China (LGFVs) could possibly happen in 2018, although the odds are still less than 50% according to a report published today by Pengyuan International titled “China’s Turning To ‘Tough Gradualism’ In Discipling Local Government Borrowing Foretells Higher Risk of LGFV Default”.
The central government of China launched recently a three-year critical battle against financial risks. Allowing LGFV default (“shock therapy”) may become a policy choice to dispel investor belief in implicit government support to LGFVs and thus help tame hidden local government borrowing, which occurred primarily through LGFVs.
“We believe Chinese government is turning to ‘tough gradualism’ rather than “shock therapy” in disciplining local government borrowing”, said Liang Zhong, analyst of Pengyuan International, “in another word, the central government is likely to tighten relevant discipline gradually, bearing in mind the needs to balance between achieving growth target and securing financial stability”.
The report argues that the “tough gradualist approach” means some type of credit events could happen before the others. For instance, the first default on public bond by LGFV sector in onshore market is likely to precede LGFV default on public bond in offshore.
As the risk of LGFV default rises, greater scrutiny of LGFV creditworthiness becomes increasingly necessary, including scrutinizing provincial economic and fiscal data according to the report.
“If China’s central government adheres to ‘tough gradualism’, namely tightening discipline steadily over local government borrowing, there it is good chance that the once relentless hidden LGT borrowing could be tamed markedly within three years.” Said Mr. Zhong.
ANALYSTS CONTACT
Mr. Liang Zhong
+852 3596 6140
liang.zhong@pyrating.com
MEDIA CONTACT
media@pyrating.com
OTHER ENQUIRIES
contact@pyrating.com
The document summarizes the origins and spread of the 2007-2009 financial crisis. Key factors included the rise of subprime lending during the housing boom, deregulation of the banking industry, and the growth of complex financial instruments like securitization of subprime mortgages, collateralized debt obligations, and credit default swaps, which spread risk but lacked transparency and regulation. These issues led to a collapse in the housing market starting in 2005 and the full crisis in 2007-2008.
Startups in a Down Economy: Legal, Business, and Financing Strategiesideatoipo
This document provides an overview of legal issues that may arise for businesses during an economic downturn or recession. It discusses force majeure clauses, impracticality defenses, and business interruption insurance that may apply if a company cannot fulfill its contractual obligations due to a recession. It also covers alternative financing options, debt restructuring, cancellation of indebtedness income, and fiduciary duties of management. The presentation aims to help businesses navigate legal responsibilities and mitigate risks in a difficult economy.
This document discusses credit risk management for financial institutions. It covers topics such as how financial institutions transform household savings into loans, the importance of credit risk management, credit quality problems over time, analyzing different types of loans including real estate, consumer, small business and commercial loans. It discusses tools for credit analysis like the five C's of credit, cash flow analysis, ratio analysis, Altman's Z-score model and Moody's expected default frequency model. The document is from a textbook on financial institutions by Dr. Muath Asmar from An-Najah National University.
This document provides a summary of key changes in loan documentation that are creating opportunities for mid-market borrowers. Specifically, it discusses how historically rigid loan terms are giving way to more flexible "permitted baskets" and "grower baskets" that expand over time. It also explores how features like accordion facilities and reductions to mandatory cash sweeps are allowing borrowers greater flexibility to engage in strategic activities like acquisitions while maintaining debt levels. The document analyzes these shifts through several examples and suggests borrowers should capitalize on the increasingly borrower-friendly loan market conditions.
Project Finance - Rate Rise May Herald A Wave Of Refinancing In The Bond Mark...Yong (Xenia) Xie
Rising interest rates could boost refinancing in the infrastructure project bond market. Lower swap breakage costs due to higher rates would make refinancing existing bank loans via new bonds less expensive. Over €40 billion worth of infrastructure loans from 2010-2013 could benefit. Institutional investors are eager for infrastructure assets offering stable yields. If deal flow matches demand, financing conditions may improve further.
This document discusses credit analysis and financial distress prediction. It covers key topics including why firms use debt financing, potential downsides of debt financing, and differences in debt financing practices internationally. It also describes the credit analysis process in private debt markets, including conducting financial analysis and assembling loan structures. Methods of predicting financial distress like Altman's Z-score model are also discussed.
The document provides information about BBVA Compass, including:
1) It discusses the causes of the mortgage crisis and credit crunch, tracing it back to legislative changes in the 1970s that loosened mortgage requirements.
2) It provides an overview of BBVA Compass, noting it has over $65 billion in assets and 717 branches across the Sunbelt region.
3) It highlights BBVA Compass' strong capital and liquidity positions and conservative lending practices that position it well in the current economy.
Mercer Capital's Bank Watch | May 2022 | Specialty Finance AcquisitionsMercer Capital
Brought to you by the Financial Institutions Team of Mercer Capital, this monthly newsletter is focused on bank activity in five U.S. regions. Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.
Collateralized debt contracts are common in India, with housing loans making up nearly half of personal loans. Debt contracts typically contain restrictive covenants that limit the borrower's actions. Common covenants include restrictions on dividend payouts, asset sales, taking on additional debt, and engaging in mergers or acquisitions. Violating covenants can result in penalties, higher interest rates, demanding full repayment or terminating the debt agreement.
Commercial property lending in the United States continued upward momentum in 2014 and is expected to stay strong in the year ahead. This quick guide helps you jump start your commercial real estate strategies for bridge lending in 2015.
Learn more: http://www.us.jll.com/united-states/en-us/services/investors/capital-markets/debt-and-equity-finance
1) Credit risk mitigation aims to reduce credit risk through tools that alter the six factors that credit risk depends on: exposure at default, loss given default, probability of default, risk mitigation, concentration, and default dependency.
2) Two common methods for reducing exposure at default are bilateral netting, which allows offsetting exposures between counterparties, and principal amortization, which schedules principal repayment over the life of a long-term loan.
3) Most credit risk controls are implemented upfront through contractual terms, though some like credit default swaps and securitization are used after origination to transfer existing credit risk.
This document summarizes information about Prosper Marketplace, Inc., a peer-to-peer lending platform. Some key points:
- Prosper was the first US peer-to-peer lending platform, launched in 2006, and has pioneered the development of this asset class.
- Peer-to-peer lending allows borrowers to access competitive loan rates and terms while reducing costs for lenders compared to traditional banks.
- Prosper has attracted highly creditworthy borrowers, with average credit scores of 701 and incomes of $85,761. This creates an investment opportunity for lenders to earn returns from consumer lending.
- Prosper uses a rigorous risk management process to underwrite and service loans,
Madison Street Capital Investment Bank alternative lending white paper kdcunha
Alternative lending sources provide capital options for lower to middle market companies that are often deemed "unbankable" by commercial banks. These alternative lenders include specialty finance companies, credit hedge funds, business development companies, mezzanine lenders, private equity funds, and special situation funds. While alternative lending can fill capital gaps, the costs are typically higher, including high interest rates in the teens to low 20s, restrictive covenants, equity components, high fees, and personal guarantees. However, for some businesses, the rewards of accessing capital to pursue opportunities outweigh the costs of doing nothing or the inability to access traditional bank loans.
This document summarizes a study examining the role of borrower reputation in mitigating adverse selection and moral hazard in the subprime mortgage market leading up to the 2007-2008 financial crisis. The study uses data from a major subprime lender to analyze the differences between full documentation and low documentation loans. It finds that while low documentation loans performed worse, this effect was strongest for low-doc loans to W2 borrowers who could have obtained full-doc loans. However, for self-employed borrowers who relied on low-doc loans for credit access, there was little difference in performance between loan types. This suggests reputation concerns constrained adverse selection and income exaggeration for self-employed borrowers on low-doc loans. The
Credit ratings are assessments of a borrower's creditworthiness provided by credit rating agencies. They rate entities seeking loans and debt issues on their likelihood of repayment. Higher credit ratings mean lower interest rates and approval for loans. Credit ratings also influence bond purchases and markets. Maintaining a high rating over time through consistent good credit is important for borrowers.
The document discusses the growth of structured finance obligations (SFOs) in India and their importance for credit rating agencies. It notes that SFOs allow issuers to receive higher credit ratings through mechanisms like credit enhancement from third parties. This allows issuers to issue debt at lower interest rates compared to traditional instruments. The share of SFOs in the debt market is growing and they are increasingly preferred by issuers over traditional debt. As SFOs are expected to grow further, credit rating agencies see them as an important new area for growth and must develop expertise in evaluating the various risks involved in rating them.
A great primer on Financial Restructurings prepared by Valerio Ranciaro, General Director from SACE, covering everything you need to know from analyzing the capital structure of a company, to the procedures in financial restructure, to a case study of the restructuring of Telecom Argentina.
This document discusses liquidity risk management for financial institutions. It begins by defining liquidity risk and explaining that depository institutions are highly exposed due to holding short-term liabilities to fund long-term assets. It then examines the causes of liquidity risk, effects of deposit drains on banks' balance sheets, and tools for measuring and managing liquidity risk such as the financing gap and net liquidity statement. The document also addresses liquidity issues for other financial institutions like insurance companies and investment funds.
This document provides an overview of credit allocation and SME financing in Korea. It defines credit allocation and discusses theories of credit rationing due to information asymmetries. It also examines how SMEs are an important part of the Korean economy, comprising over 99% of businesses. The main sources of financing for Korean SMEs are bank loans, policy loans, and credit guarantees, as SMEs struggle to access capital markets. The government supports SME financing through programs like the Korea Credit Guarantee Fund and Small Business Administration loans.
Moody's downgrades Noble Group to Ba1; outlook negativeGE 94
Moody's downgraded Noble Group's ratings to Ba1 from Baa3 due to concerns over the company's liquidity and low profitability. While Noble plans to improve its liquidity through asset sales and cost cuts, Moody's views Noble's liquidity position as still constrained and expects challenges to consistent access to bond markets, characteristics more consistent with Ba-rated entities. The negative outlook reflects execution risk in Noble's plans and uncertainty from low commodity prices.
Similar to Lev Finance Cov Lite article July 2014 (20)
Moody's downgrades Noble Group to Ba1; outlook negative
Lev Finance Cov Lite article July 2014
1. Leveraged Finance:
Covenant-Lite Issuance Casts A Cloud
Over Future Default Levels
Primary Credit Analysts:
John W Sweeney, New York (1) 212-438-7154; john.sweeney@standardandpoors.com
Kenneth J Fleming, New York (1) 212-438-1490; kenneth.fleming@standardandpoors.com
David P Wood, New York (1) 212-438-7409; david.wood@standardandpoors.com
David C Tesher, New York (1) 212-438-2618; david.tesher@standardandpoors.com
Table Of Contents
Covenant-Lite Issuance Is Swelling, Especially 'B' Rated Loans
Default And Recovery Data On Covenant-Lite Loans
Covenant-Lite Borrowing Is More Prevalent In Certain Industry Sectors
Than Others
How Standard & Poor's Assesses Covenant-Lite Risk
Positive Market Momentum May Be Veiling Credit Risk--The Surge In 'B'
Rated Loans Is The Major Concern
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 1
1357219 | 300614293
2. Leveraged Finance:
Covenant-Lite Issuance Casts A Cloud Over
Future Default Levels
With the current hyper-liquidity in the capital markets, largely due to central bank "cheap-money" policies, and
investors' unquenchable thirst for yield, the issuance of covenant-lite first-lien loans, which lack financial maintenance
covenants, has boomed in 2013 and thus far in 2014. Standard & Poor's Ratings Services is concerned that the sizable
amount of first-lien covenant-lite loans now outstanding, particularly those rated in the 'B' category, along with rapid
growth in traditional 'B' first-lien loan issuance, could result in elevated refinancing risk and/or a spike in defaults in
the event of a future liquidity crisis. (Watch the related CreditMatters TV segment titled, "Booming ‘B’-Rated
Covenant-Lite Issuance Heightens Restructuring And Default Risk," dated July 15, 2014.)
Overview
• There has been a proliferation of covenant-lite corporate loan borrowing in the U.S. over the past 18 months, a
majority of which Standard & Poor's rates in the 'B' category.
• General market stability and positive economic conditions are masking the credit risk associated with 'B' rated
covenant-lite and traditional loans.
• In the event of a significant financial market liquidity crunch, default rates for covenant-lite borrowers could
spike well above the levels seen during the 2008-2009 financial crisis.
Loan refinancing risk currently peaks in the 2017-2019 period (see chart 1). If a liquidity crunch were to occur in any of
these years, banks and investors would become more risk averse as issuer performance and liquidity deteriorates.
Refinancing risk could then amplify for borrowers of maturing loans without financial maintenance covenants, as these
borrowers could become less attractive to a more limited and discerning lender base. Rapid credit erosion could then
occur for companies unable to satisfy their new funding requirements. In our opinion, lenders should not interpret
historical covenant-lite default levels from the last downturn--or currently subdued default rates--as a sign of what the
future holds, and should expect default rates for 'B' rated loans--particularly 'B' rated covenant-lite loans--to increase
during the next downturn.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 2
1357219 | 300614293
4. Covenant-Lite Loans Defined
Covenant-lite senior loan transactions do not contain financial maintenance covenants, which stipulate minimum
financial performance measures for the borrower. However, they are not devoid of covenants. Covenant-lite
loans, much like speculative-grade bonds (those rated 'BB+' or lower), typically contain incurrence-based
covenants; for example, a credit agreement may limit a company's ability to incur additional indebtedness. The
agreement may also place restrictions on liens, asset sales, investments, etc. Loan structures that lack
maintenance covenants can potentially hinder a lender's ability to re-price credit risk and reduce a lender's ability
to restructure a problematic loan and mitigate potential losses. They are favored by borrowers because of the
additional financial flexibility they can provide in periods of stress due to their lack of financial metric restrictions.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 4
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels
5. Covenant-Lite Issuance Is Swelling, Especially 'B' Rated Loans
Covenant-lite loans that came to market in 2013 reached record levels of $260 billion--up markedly from $97 billion in
2012. According to data compiled by S&P Capital IQ's Leveraged Commentary & Data (LCD), covenant-lite loans
have accounted for 66% of new loan volume for 2014 year to date, compared to 57% in 2013 and 32% in 2012 (see
chart 2).
In the years prior to the credit crunch of 2008, 'B' rated loan issuance outpaced 'BB' issuance on an annual basis.
Beginning in 2008, however, lenders became more discriminating, and the trend reversed. Then in 2012, the trend
came full circle, and 'B' rated lending once again began to dominate the speculative-grade loan market (see chart 3).
Meanwhile, year-to-date 2014 'B' rated covenant-lite issuance has accounted for 58% of total covenant-lite issuance,
compared to only 38% in 2007 (see chart 4).
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 5
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels
7. Chart 4
Default And Recovery Data On Covenant-Lite Loans
Our research shows that covenant-lite loans in the 2007-2013 period have fared somewhat better than traditional loans
from a default perspective, but slightly weaker from a recovery viewpoint (see charts 5 and 6). However, there is only
limited data on covenant-lite defaults, and even less data on covenant-lite loan recovery, which makes it very difficult
to draw definitive conclusions. At the peak of the last credit cycle in 2007, covenant-lite lending accounted for only
25% of total loan issuance, with a relatively smaller percentage of these transactions rated in the 'B' category. This
contrasts markedly with 2014, where covenant-lite issuance has accounted for approximately two-thirds of loan
market issuance, with a majority in loans in the 'B' rating category, which, by definition, have higher default
probabilities and refinancing risk than 'BB' rated loans. If the current elevated 2014 'B' rated loan issuance volume run
rate continues through year-end, new loans in this rating category for 2012-2014 will total approximately $694
billion--up about 40% from 'B' rated loan issuance of $501 billion in 2005-2007.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 7
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels
9. Covenant-Lite Borrowing Is More Prevalent In Certain Industry Sectors Than
Others
Covenant-lite loans are not evenly distributed across industry sectors (see chart 7). Over the past year and a half,
borrowers in industries such as retail, manufacturing and machinery, and building materials have come to market with
more than 90% of their first-lien loans having no maintenance covenants. For example, in the case of building material
companies, expectations for improving housing and construction markets are driving lenders' willingness to lend under
covenant-lite terms. And borrowers in this sector are reluctant to agree to maintenance covenants in the current credit
cycle because of the problems they encountered with these covenants in the last downturn. In the case of
manufacturing, the perceivably strong collateral coverage that lenders have continued to obtain partially explains the
high level of recent covenant-lite issuance in this sector. On the other hand, less than half of the issuers in the oil and
gas, transportation, and cable industries are utilizing covenant-lite structures.
How Standard & Poor's Assesses Covenant-Lite Risk
Standard & Poor's considers the deterioration in loan covenant protections for creditors as being typical of the
booming, highly liquid debt capital markets, where terms, conditions, and borrowing costs have moved increasingly in
favor of borrowers at the expense of lenders. While we are concerned about the proliferation of 'B' rated covenant-lite
loans for the reasons previously mentioned, we are of the opinion that there are both positives and negatives
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 9
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels
10. associated with this type of transaction from a credit risk perspective at the individual loan and issuer level. Hence, we
do not view the structure as inherently good or bad.
In our view, the absence of maintenance financial covenants can provide a company with additional financial flexibility
(i.e., liquidity) in times of stress, precluding lenders from having the ability to accelerate a loan via a technical
event-of-default provision. This added liquidity can provide a lifeline for an issuer in a period of stress, ultimately
enabling a company to recover without defaulting or needing to renegotiate terms, conditions, and pricing. That said,
the lack of maintenance covenants can also give aggressive financial management teams and sponsors more latitude
to pursue shareholder-friendly and other actions that may ultimately hurt their credit profiles. Instead of saving a
company, a covenant-lite loan structure, under certain circumstances, could simply delay an inevitable default--and
severely undermine a company's enterprise value along the way, impairing lenders' recovery prospects.
From an analytical perspective, Standard & Poor's considers maintenance covenants in two specific areas of our
corporate and recovery ratings. First, when financial triggers are embedded in a debt structure (i.e., in a "traditional"
non-covenant-lite transaction), our forward looking projection analysis captures these triggers via our liquidity
analysis. Second, the potential for aggressive management from a financial sponsor, which is further increased with
covenant-lite transactions, is an explicit factor we incorporate into our forward-looking speculative-grade corporate
credit ratings.
As part of our recovery analysis, we simulate a hypothetical path to default for the borrower. We assume that
borrowers with maintenance covenants in their loan agreements will trigger these covenants as their financial position
weakens and they approach insolvency. Such a scenario typically results in an amendment/waiver process where the
bank syndicate subsequently demands higher interest margin compensation to offset the greater default risk to which
they are now perceivably exposed. The increase in interest expense implies that a company will default at a slightly
higher level of profitability than it would have otherwise attained (because it will likely default sooner than it would
have minus the maintenance covenants), resulting in less business value deterioration and, thus, relatively greater
recovery prospects for lenders.
In our recovery study published in January 2013 and updated in February of this year (see "Standard & Poor's U.S.
Recovery Rating Performance--A Five Year Study," published Jan. 29, 2013, and "U.S. Recovery Rating Performance
Study: 2007-2013," Feb. 25, 2014), we compared the default and recovery performance of covenant-lite facilities to
those of our entire universe of rated speculative-grade corporate debt. From 2007 through 2013, we found that
covenant-lite loans have slightly lower default rates, but that recovery levels were not quite as robust. When defaults
for covenant-lite loans did ultimately occur, however, enterprise values experienced slightly greater erosion than
secured loans with traditional maintenance covenants, thereby reducing lender recoveries.
Positive Market Momentum May Be Veiling Credit Risk--The Surge In 'B' Rated
Loans Is The Major Concern
Although the absence of maintenance financial covenants can help a company by providing it with additional financial
flexibility, covenant-lite loan structures increase the likelihood that financial managers/sponsors will take aggressive
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 10
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels
11. actions that could hurt the borrower's credit profile. Standard & Poor's incorporates this risk into its forward-looking
financial policy assessment of sponsor-owned and highly leveraged corporate entities. Further, when defaults do occur,
we'd expect the financials of companies without maintenance covenants to deteriorate somewhat more than those
with traditional financial covenants, which would likely modestly reduce overall debt recovery rates.
Currently favorable economic and market conditions are masking the risks associated with the spate of covenant-lite
and traditional loans--particularly the 'B' rated ones--recently coming to market. It is our view that if a marked liquidity
crisis were to occur, preventing covenant-lite and traditional loan structure borrowers from acquiring new funding, the
default rate for bank loans, as well as the dollar value of defaults, would rise--possibly significantly--from the levels
experienced in 2008-2009.
WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 14, 2014 11
1357219 | 300614293
Leveraged Finance: Covenant-Lite Issuance Casts A Cloud Over Future Default Levels