Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

Few-strings-attached loans at record levels

Aleaimage | E+ | Getty Images

Bank lending to companies with few restrictions has surged back since the financial crisis virtually killed the practice.

The record issuance of so-called covenant-lite loans raises questions over whether a fresh wave of debt defaults and losses will return—probably not in the short term, according to experts, but becoming more likely as the trend plays itself out in coming years.

U.S. "cov-lite" loan volume recently hit $83.6 billion over 82 deals in 2014, up 41 percent from the same period in 2013 ($59.4 billion over 68 deals), according to data tracker Dealogic. That represents the highest year-to-date volume and deal activity on record.

Credit Suisse leads the U.S. for such loans with a 12.8 percent market share in 2014, according to Dealogic. The Swiss bank is followed by Citigroup and Deutsche Bank with 11.5 percent and 10.8 percent of loans, respectively.