This week we continue our conversation with Jessica Reiss, the head of leveraged loan research at Covenant Review. Also joining the conversation is Kerry Kantin, a managing director covering leveraged loans at sister company LevFin Insights. Begun in 2006, Covenant Review is the world’s first boutique research firm focused on bond and loan covenants. LevFin Insights provides news and analysis covering the debt capital markets including leveraged loans, high yield, secondary trading, CLOs, middle market and BDCs. Second of two parts – View part one.

The Lead Ledt: Sort of like the mythic fruitcake that keeps getting passed around during the holidays.

Kerry Kantin: But now the calendar is building. Investors have increased leverage to negotiate deal terms. One such example is delayed draw term loans. With more issuers seeking DDTLs with 24-month availability, investors have pushed back for better ticking fees. It was a hot market for issuers in January. It’s more investor friendly now.

KK: Another area is free-and-clear baskets. They’ve been launched at one times ebitda, but are getting reigned in. Sponsors know they won’t necessarily get it. But investors are pushing back. MFN [most favored nation] sunset provisions are good examples. The sunset periods are extending from six to twelve months. And the spread differentials are tightening from 75 bps to 50 bps.

TLL: I suppose with exceptions to everything.

Jessica Reiss: Yes, there are carve-outs and exceptions to everything. Usually there’s a list of reasons and carve-outs. There are random exceptions out there. We’ve seen an aggressive deal where there’s no MFN protection at all. Look, if the sponsor goes out with fifty crazy things and ten get dropped, lenders are happy!