Covenant-Lite Loans

Covenant-Lite Loans: A type of loan whereby financing is given with limited restrictions on the debt-service capabilities of the borrower. The issuance of covenant-lite loans means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income.
The evolution of covenant-lite loans can generally be traced to the historical buyout power of private equity groups performing highly leveraged buyouts. The power of these buyout groups led to the relaxation of loan restrictions, and arguably providing increased flexibility for repayment.

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covenant-lite — USA A type of loan facility which has less financial covenant restrictions than is ordinarily required. Covenant lite loan facilities take various forms but may be broadly characterized as senior syndicated leveraged loan facilities with the… … Law dictionary
Cov-lite — ( covenant light ) is financial jargon for loan agreements which do not contain the usual protective covenants for the benefit of the lending party. Although traditionally banks have insisted on a wide range of covenants which allow them to… … Wikipedia
maintenance test — USA A financial ratio test for covenant compliance that needs to be met at regular intervals (such as quarterly or the end of each fiscal quarter). For example, the borrower may be required to maintain a leverage ratio of less than 3.0:1.0. The… … Law dictionary

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