Covenants 101: The Amendment and Waiver Provisions in European Leveraged Loans Explained

The language in leveraged loan documentation is not always straightforward. In our Covenants 101 series, we demystify key concepts and provisions of high-yield and leveraged loan documents, explaining them in plain English. We hope this series will be a valuable resource for market participants’ forays into high-yield and leveraged loan covenants. In this installment of our Covenants 101 series, we discuss the amendment and waivers provision in European leveraged loans. The amendments and waivers provision is one of the most important in leveraged loan documentation, not least because it dictates how other provisions of the loan can be amended. Other covenants discussed in this series, such as the restricted payments covenant and the debt covenant, might on its face afford adequate protection to investors. But if the borrower together with a subset of lenders (example majority or supermajority) can amend such other covenants using the terms of the amendments and waivers provision to allow for an action otherwise not permitted, that might put the unwary minority lender in a quandary. For that reason, the amendment provision is an area of particular focus for all parties when a borrower becomes stressed. What Is The Amendments and Waivers Provision, and Why Have[...]