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Fees for High-Yield Loans Said to Rise
January 3, 2008
High-yield lenders may have had to write down the value of some of their loans, causing some pain. But Bloomberg News said Thursday they appear to be making some of their money back.
To relax the terms of their repayment, borrowers of these risky loans, which are often essential to buyouts, have had to increase the interest on their debt by an average of 0.83 of a percentage point, according to Standard & Poor’s. That’s the highest since at least 1997 and four times higher than six months ago.
Creditors are also demanding fees of as much as 0.35 percentage point of the value of loans to relax terms, or covenants, such as the minimum ratio of earnings to debt they require or deadlines for reporting quarterly financial results, S&P said. Before June, lenders charged 0.125 percentage point.
More borrowers, such as the Carlyle Group’s LifeCare Holdings, may have to pay those rising prices, Bloomberg said. About 179 North American companies have a high risk of default or may need to change details of their debt agreements, according to Moody’s Investors Service.
To be sure, many of the high-yield loans issued in 2007 were so-called covenant-lite loans, or those with few restrictions. But many companies took advantage by loading up on debt, leaving them less able to pay back the interest on those loans.
Source : http://dealbook.blogs.nytimes.com
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