"Just because investors are demanding more conservative structures does not mean they are getting them," the ratings agency wrote.
"What should be a real concern for investors is the fall in cash coverage ratios, which are lower than in 2007, when they were already at record thin levels." The average ratio of earnings before interest, tax, depreciation and amortisation (EBITDA) to cash interest was 2.2 times in the first quarter, versus 2.5 times in 2007, it said.
"Thin credit metrics mean that companies have less of a cash cushion if market conditions change or additional capital needs to be invested in the business, resulting in a greater risk of default," the agency warned.
Meanwhile, "leverage has not fallen as much as would be expected in a market plagued by lack of liquidity." The average debt-to-EBITDA multiple in the first quarter was 5.8 times, versus 5.9 times in 2007.
For deals between 250 million and 500 million euros, leverage actually rose -- to 6.95 times from 5.8 times in 2007.
"This is possibly because regional banks often lend to the smaller local companies and are willing to lend large amounts of debt to issuers with which they have a relationship," S&P said.
In addition, average purchase price multiples rose to 10.4 times EBITDA from 9.7 times in 2007. However, there were some mitigating factors.
The average equity contribution in a buyout was 42 percent, up from 34 percent in 2007, and leverage at the senior level -- where bank lenders provide funding -- has fallen to 4.4 times EBITDA, versus 5.2 in 2007, S&P said.