Companies hit covenant reset button during crisis

摘要

Around 12% of all rated companies in EMEA agreed amendments to covenants on their loans in 2020 as they sought leeway to rebuild battered earnings during the Covid-19 crisis, according a Moody's report. Moody's identified 121 rated companies that obtained amendments on their loan agreements in 2020 as plunging earnings and prolonged cash burn threatened debt covenants - particularly leverage covenants - forcing borrowers to seek financial covenant relief. Companies sought covenant waivers for up to four quarters, often replacing them with a more straightforward minimum liquidity tests as they launched cost cutting and liquidity preservation measures. Covenant amendments peaked in April to June 2020, at the height of lockdowns in many countries, with waivers often granted into 2021 or beyond, indicating when participants expected a gradual recovery in earnings, the report said.