Since the end of the financial crisis in mid-2009, six months after the Federal Reserve dropped the federal funds rate to near zero, non-investment grade companies have found it easier than ever to access the debt markets to raise cheap capital. The resulting “chase for yield” by investors led to increased competition in the leveraged loan and high-yield market, narrowing credit spreads and fueling the rise of covenant light (“cov-lite”) loans and bond indentures that offered little to no financial covenants and considerably reduced protections for lenders and bondholders.

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