Alternative Credit Investor | Covenant Breaches Decline for Third Quarter in a Row

Feb 2024

Originally posted by Alternative Credit Investor on February 22, 2024.

According to the Lincoln International Valuations & Opinions Group proprietary data, lenders and borrowers are proactively addressing potential defaults and thus fewer private equity (PE)-backed companies are breaching covenants.

Richard Olson, Managing Director in Lincoln’s Valuations & Opinions Group, commented, “Covenant breaches declined for the third quarter in a row, and lenders continued to support borrowers with amendments, as well as PIK pricing to conserve cash.”

European mid-market companies are also performing well. In an analysis of 300+ PE-backed businesses, Lincoln found that private credit fair values were mostly flat at 97.3 percent in Q4 and credits in stress / distress continued to be stable at 2%.

Richard said, “Transactions continued to get done for the small number of high-quality mid-market businesses put up for sale – in many cases with robust multiples – and debt has become more available both from credit funds and banks, with the limited number of new deals providing competitive tension on private credit pricing.”

View additional insights in the original article.