By Christopher Kandel

We have already commented on the strong growth of the covenant-lite market in Europe for leveraged loans. The combination of a supply/demand imbalance in European leveraged loans — too little supply and much investor demand — and competition from the US leveraged loan market, has resulted in strong growth in the European covenant-lite loan market since the beginning of 2014. There has also been a loosening of covenants generally for mid and top-tier European loan financings, whether taking the covenant-lite form or not.

News from China and other emerging markets and the general decline in various commodity prices, together with concerns over the possible effects of an increase in interest rates in the US, have caused volatility in the equity markets. This volatility has also been reflected, to differing degrees, in the high yield and leveraged loan markets around the world.