Our Legal Insights Blog

Most of the 2026 conversation about credit documentation is a conversation about erosion. Cov-lite as the default, EBITDA add-backs with no cap and no time horizon, restricted payments capacity that opens up while a business is already showing stress. Spend enough time in the broadly syndicated market and you start to think that this loosening is the natural state of things. But the lower middle market is different. In this week’s Knowledge Series webinar, I spoke with Reed Van Gorden, Head of Origination, and Natalie Garcia, Head of Underwriting, at Deerpath Capital. The headline: while the covenant architecture is the same one a broadly syndicated investor would recognize, the calibration is materially tighter.

The Asset Sales covenant doesn't get the attention the Restricted Payments and Debt covenants tend to attract, but the application ofproceeds provisions do a lot of heavy lifting. They determine what the borrower must do with the proceeds of an asset sale, and how much flexibility it has to use them for other purposes. Kantar's preliminary OM for the 2030 notes is a clear illustration of how much a single provision can change this outcome.

I recently attended the Annual Conference and Exhibition of National Conference on Public Employee Retirement Systems (NCPERS) in Las Vegas. NCPERS is the leading voice and resource for the public pension industry in the United States. I attended three panels focused on how private markets and related investments are interacting with this industry, curious about how pension fund trustees - most of whom are not trained investment professionals - discern quality among private credit managers pitching their platforms.

This week I sat down for breakfast with a small group of senior credit professionals in New York. It was the eighth stop in the documentation risk roundtable series, part of the Covenant Exchange initiative. It came after Amsterdam, Los Angeles, Paris, Seoul, Tokyo, Sydney, and Melbourne. New York is the city where the cooperation agreement was born, and it is now the city where the cooperation agreement is starting to come apart.

In Part 1, I walked through what fifteen years did to the Optional Redemption, Debt, and Restricted Payments covenants in Capsugel's documentation, comparing the 2011 unsecured bond against the senior secured deal marketed last week. In this part 2, we continue the review of how, provision by provision, the borrower gained flexibility with the loan market's fingerprints all over the bond.

We keep hearing that covenants have erodedover the past 15 years, but how many of us know what that really means in practical terms?

On the last day of April, I sat down for breakfast with a small group of senior credit professionals in Melbourne. It was the second of two Australian sessions in the documentation risk roundtable series, part of FLT’s Covenant Exchange initiative. It was the sixth stop after Amsterdam, Los Angeles, Paris, Seoul, Tokyo, and Sydney. 

This week I convened a Covenant Exchange roundtable in Sydney. Participants from private credit, super fund, family office, asset management, and legal shared views on documentation risk, and the conversation ranged across jurisdictions and case studies. The repeating theme, which we’ve seen at each of these events, was that documentation matters, and so does everything that sits on top of it.