Protections have gotten so lax in the $1 trillion market forU.S. leveraged loans that if an offering comes with decentcovenants, lenders take it as a sign that something's wrong withthe deal.

“You do have to think twice when you see a loan with a covenantthese days,” says Thomas Majewski, managing partner and founder ofEagle Point Credit Management.

It's not a crazy assumption in a market where 75% of new loansare now defined as “covenant-lite,” meaning a company could, forexample, rack up as much debt as it wants regardless of itsperformance. In such a lenient atmosphere, the reasoning goes, aloan must be a stinker if a borrower has to resort to promisingeven standard protections.