Riskier companies are increasingly getting credit agreementsthat allow them to raise the amount of future cost savings toappear more creditworthy, boosting potential losses forinvestors.
The tweaks make it easier for borrowers to stay in compliancewith their loan terms and add more debt, according to CharlesTricomi, a senior analyst at covenant research firm XtractResearch.
“There is too much money chasing too few loans,” Tricomi said.“Lenders are really at a disadvantage and have to agree to theseterms significantly against their own interest, terms that theyshould be fighting off.”
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