Lenders in the leveraged loan market are increasingly agreeingto looser terms that let companies load up on more debt with fewerprotections.

In a report published Wednesday, Moody's Investors Service warnsthat default risk is rising because of the loosening of creditpacts to allow unlimited future borrowings. About 80% of new loansinclude these incremental options that carry few conditions.

The Moody's report is the latest warning that standards arebeing eroded in the market for riskier corporate credit asinvestors give up protections while seeking refuge from easy-moneypolicies that have pushed yields on more than $11 trillion of debtbelow zero. Covenant research firm Xtract Research said last monththat riskier companies are getting credit agreements that allowthem to raise the amount of future cost savings to appear morecreditworthy.

“Without significant investor pushback or continued regulatoryfocus, incremental facility structures will likely remain in theircurrent weak state,” Enam Hoque, Moody's vice president and seniorcovenant officer, said in the report. As well as increasingleverage and default risk, the looser structures also can dilutethe claims of existing lenders in a bankruptcy.

The number of loans with weak incremental facility protectionsrose from 46% in 2013, according to the report. Nearly half ofleveraged loans issued this year included incremental debtstructures, according to Moody's.

The structures are increasingly attracting the attention ofregulators, according to Moody's, which cited U.S. Comptroller ofthe Currency guidance that leverage levels above six times totaldebt to earnings before interest, taxes, depreciation andamortization, “raises concerns for most industries.”

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