LFI Quick Stat: Loans with stronger covenant protection outperformed in 4Q sell-off
Based on Covenant Review’s Documentation Scores and pricing data from Markit, par loans—those bid at 80 or higher—with tighter structures outperformed in the fourth quarter amid the market’s sell-off. The data are convincing on this score. January’s market recovery, meanwhile, has been a mixed bag. Recall that Covenant Review’s Documentation Scores run from 1 (highest quality) to 5 (lowest quality); there were too few names with a 1 or 2 score to form a meaningful sample.
One is hardly a trend, but these data show that during the fourth quarter, the loans with the loosest terms experienced the most pain on average.
Please contact me with any questions or if you would like a free trial: marc.auerbach@levfininsights.com
Follow us on twitter: @levfininsights