Covenants Cheat Sheet: Essential U.S. High-Yield Bond Guide for 2024

Legal Analysts: Rebecca DeLong, Ian Chin Data: Elisabeth Campbell, Sarah Pinhasov Relevant Item: Covenants Cheat Sheet – PDF Format   Key Takeaways   Our new U.S. Covenants Cheat Sheet gives users a summary of the range and median size of the most typical baskets found in high-yield bonds over the first three quarters in 2024. The Covenants Cheat Sheet also shows how common (or rare) certain aggressive provisions are. Examples include the prevalence of uncapped adjustments for cost savings and synergies, exclusion of revolving debt from ratio calculations and presence of super-grower baskets. Armed with precise knowledge of the broader market, market participants can use the information to set proposed basket sizes and negotiate aggressive provisions in their deals. The sheet differentiates between sponsor-backed and non-sponsor-backed deals. It is no surprise that sponsor-backed deals generally achieve more borrower-friendly terms – but a specific understanding of particular provisions allows for informed pushback. For example, the sheet shows that super-grower baskets have not appeared in any non-sponsor deals during the Q1 – Q3 2024 period (and only 16% of sponsor deals). Based on this data, users may conclude that the proposed inclusion of a super-grower basket in a non-sponsor deal would be[...]