Asset-backed lending revolvers bring extra risks, Fitch warns

11/27/2012 | Reuters

Combining asset-backed lending (ABL) revolvers with covenant-lite structures is growing in popularity but the approach has some negative consequences for lenders, Fitch Ratings said in a report. "The combined ABL and covenant-lite structure provides a borrower greater flexibility and more advantageous pricing," the firm said. "However, an ABL revolver ahead of a covenant-lite term loan could adversely impact future recovery rates on covenant-lite loans."

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