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Just One Third Of All Loans Are NOT Covenant-Lite

Tyler Durden's picture




 

Back in February 2013, when then-Fed governor Jemery Stein commented on the "overheating in the credit market", he noted that "the annualized rates of PIK bond issuance and of covenant-lite loan issuance in the fourth quarter of 2012 were comparable to highs from 2007." Indicatively the percentage of covenant-lite deals as a percentage of total then was a little under 30%. Shortly after that he quietly left the Marriner Eccles building, knowing well what is coming, and a good thing he did because since then the bubble across all credit products has left many dumbfounded, and nowhere is this more obvious than in the total volume of cov-lite deals, which has doubled since Stein's letter, and is now approximately at two third of all loan issuance.

In other words, just one third of all loans are not covenant lite.

So if the credit market was "overheating" when only one-third of all loans had no covenants, we wonder what Stein would say now, two years later, when just one-third of all loans have covenants... if anything?

Source: Citi

 

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Fri, 04/10/2015 - 13:58 | 5979551 KnuckleDragger-X
KnuckleDragger-X's picture

Nothing to see here, move along.....

Fri, 04/10/2015 - 14:09 | 5979593 NoDebt
NoDebt's picture

None of this makes any sense UNLESS you believe the Fed is an iron-clad lock for doing a second bank (and non-bank) bail-out when everything goes tits-up again.

Which is what I believe they are..... um.... banking on.

 

 

Fri, 04/10/2015 - 14:34 | 5979741 KnuckleDragger-X
KnuckleDragger-X's picture

LBJ deciding what we should bomb in Vietnam from the White House worked great too........

Fri, 04/10/2015 - 16:09 | 5980111 Slurm
Slurm's picture

Frothy market, stay thirsty my friends.

Fri, 04/10/2015 - 23:03 | 5981265 chilli sauce
chilli sauce's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

Fri, 04/10/2015 - 14:01 | 5979566 LawsofPhysics
LawsofPhysics's picture

How long until the word collateral goes extinct?

Fri, 04/10/2015 - 14:04 | 5979577 LetThemEatRand
LetThemEatRand's picture

Nah, they need to word to describe dead attendees of weddings in drone over countries.

Fri, 04/10/2015 - 14:08 | 5979599 LawsofPhysics
LawsofPhysics's picture

Amazing what shit goes down once you allow a chosen few to completely invert the capital structure pyramid.

Fri, 04/10/2015 - 14:35 | 5979745 sessinpo
sessinpo's picture

As long as there is slavery, there is always collateral.

Fri, 04/10/2015 - 14:01 | 5979567 adr
adr's picture

Somebody told me debt doesn't matter.

Fri, 04/10/2015 - 14:05 | 5979582 astoriajoe
astoriajoe's picture

Of all people, why would you believe that guy.

Fri, 04/10/2015 - 15:15 | 5979900 bluskyes
bluskyes's picture

Perhaps he was lending money at ZIRP

Fri, 04/10/2015 - 14:03 | 5979572 Trollbot
Trollbot's picture

All good. When the bust comes.. again.. the taxpayers will just bail them out.. again.

 

NBD

Fri, 04/10/2015 - 14:08 | 5979600 yogibear
yogibear's picture

Loans to warm bodies #2.

When it goes bad Jack Lew will meet at the White House and threaten tanks in the streets again.

Bailouts bonanza version 2. Laughing all the way to their private islands.

Fri, 04/10/2015 - 14:22 | 5979685 Stroke
Stroke's picture

This time there may be tanks in the streets

Fri, 04/10/2015 - 14:39 | 5979762 LawsofPhysics
LawsofPhysics's picture

Good to see another optimist.  Compensation will return to to the people who's labor is actually worth a shit one way or another.

Fri, 04/10/2015 - 15:01 | 5979844 Sages wife
Sages wife's picture

"This is gonna be GREEAAAAT!" - Dorfman (Fat, drunk, and stupid)

Fri, 04/10/2015 - 17:07 | 5980372 Dre4dwolf
Dre4dwolf's picture

Funny thing about people who work for a living, they spend so much energy working , that when its time to get paid they don't have the energy to fight for it.

World is a messed up place, it just rewards lazy people, people who do nothing somehow endup more financially seccure under this system than people who go out and try and make something of themselves.

 

Poor people take all the risk do all the work and when it gets time to get paid , the chap on unemployement gets his and you don't get yours , meanwhile the only reason the govt has money to give the useless fool money is because they took it from you.

 

Really everyone should just fucking stop working, its getting rediculous.

Fri, 04/10/2015 - 14:11 | 5979615 Spungo
Spungo's picture

Best graph I've seen all day

Fri, 04/10/2015 - 14:17 | 5979652 motorollin
motorollin's picture

Pardon my ignorance; does this include corporate bond issuance?

Fri, 04/10/2015 - 16:19 | 5980159 DontFollowMyAdv...
DontFollowMyAdviceImaDummy's picture

deadbeat is the king of the street!

 

so pack your bowls and toke on that leaf!

 

this is simply amazing watching a system being continually run by people trying to proove that they can spend their way out of debt...

Fri, 04/10/2015 - 17:02 | 5980333 Omen IV
Omen IV's picture

So covenants are lite and stocks are north of 50 x multiple - free cash flow is going down for the world consumer taking sales and ever shrinking margins down - while the stock of companies become more valuable to buy back........

All held up by the buyer of last resort - CB's

Maybe my MBA - is worthless but I have never seen all this before in my 50 years in business - but people are very very calm - I think I'm going to watch and sit out the ensuing drama to come

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