The effect of liquidity and convergence of HY and leveraged loan terms and, particularly, the increase of covenant lite and covenant loose loans, has been cause for discussion for investors across both the high yield and loan markets for some time. Last month, expressing unease with the continued erosion of protective covenants in bond documentation and continued concern about disclosure, 21 investment firms wrote an open letter to the AFME High Yield Board requesting that the AFME Recommended Market Practices Disclosure by Issuers of the Non- Investment Grade Debt Securities be expanded and upgraded to deal with some of these matters. In this alert we consider some of the topics raised in the investor letter which impact most directly on the loans market.
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