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The rise of covenant-lite lending and implications for the UK’s corporate insolvency law toolbox

Paterson, Sarah (2019) The rise of covenant-lite lending and implications for the UK’s corporate insolvency law toolbox. Oxford Journal of Legal Studies, 39 (3). 654 - 680. ISSN 0143-6503

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Identification Number: 10.1093/ojls/gqz020

Abstract

This article is, so far as the author is aware, the first to examine in detail the implications of the explosion of covenant-lite loans for English corporate insolvency law. Covenant-lite loans lack certain early warning mechanisms that have traditionally been found in loans to heavily indebted borrowers. Concerns about the implications of covenant-lite loans have been raised in the broadcast and print media, and by economists and central banks in England and the United States. This is an issue that matters to us all. This article argues that covenant-lite lending means that lenders and borrowers may start restructuring negotiations when the scale of the distress is acute, implicating operational and financial liabilities. It provides a detailed analysis of the additional corporate insolvency law tools which may be needed as a result, and explains why this analysis is relevant for the detailed working out of current corporate insolvency law reform proposals.

Item Type: Article
Official URL: https://academic.oup.com/ojls
Additional Information: © 2019 The Author
Divisions: Law
Subjects: K Law > KD England and Wales
H Social Sciences > HG Finance
Date Deposited: 10 May 2019 10:27
Last Modified: 12 Feb 2020 13:15
URI: http://eprints.lse.ac.uk/id/eprint/100746

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