An increasing number of companies in the US are pushing their lenders to be more flexible in an attempt to take on additional debt, according to a new report by ratings agency Moody’s Ratings.
As reported by Reuters, borrowers with weaker credit profiles are seeking more flexible covenants in their credit agreements. In addition, they are avoiding getting approvals from their existing lenders when increasing their debt loads.
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The rating agency said that changes to credit agreements allowed borrowers to increase their capacity to raise more debt up to 40 to 300 per cent of their EBITDA. But this presents a major credit risk to existing lenders, particularly if the debt is used for dividend recaps or add-ons, they said.
There were nine out of 89 credit agreements where such flexibility was introduced between the start of 2024 and May 2025, all of which were by private equity-backed borrowers.
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