Covenant-Lite Is Now Covenant-Gone

Loan documents have been hollowed out for years. The next downturn will reveal what borrowers quietly negotiated away.

The Board Jul 01, 2026 1 min read

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The slow erosion of lender protections in leveraged loans has reached its logical end. The documents that govern hundreds of billions in debt now offer creditors far less than they imagine.

The danger is not visible in good times. The bill comes due in a downturn, when a lender that once could have stepped in early discovers it has no right to do so until a payment is actually missed.

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Covenant-Lite Is Now Covenant-Gone

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