Principal Asset Management -Fri, 03/28/2025 - 22:16

The Importance of Covenants

With the Upper Middle Market Direct Lending and Broadly Syndicated Loan (BSL) markets now being substantially covenant lite (covenant lite is generally defined as having no financial maintenance covenants), most lenders seem to believe that covenants don’t matter. Our experience tells us differently. It’s a bad time to start a negotiation with a borrower when their performance has declined to the extent that lenders haven’t received payment, and covenants allow lenders to address problems before little problems become big problems. That said, the value of covenants can often be misunderstood. Our latest paper examines why we demand covenants on each of our deals, and the value they provide to investors.

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Principal Asset Management

With public and private market capabilities across all asset classes, Principal Asset Management^SM and its specialist investment teams are focused on harnessing the potential of every opportunity to secure an advantage for its clients.

The 28th largest manager of worldwide institutional assets under management of 411 managers profile, Principal Asset Management applies local insights with global perspectives to identify compelling investment opportunities and deliver distinctive solutions aligned with client objectives.¹

Principal Asset Management is the global investment management business for Principal Financial Group® (Nasdaq: PFG), managing $559.1 billion in assets and recognized as one of the “Best Places to Work in Money Management” for 13 consecutive years.^2,3

Learn more at PrincipalAM.com

^{1 Managers ranked by total worldwide institutional assets as of December 31, 2023. Pensions & Investments, “Largest Money Managers,” June 2024.}
^{2 Principal Asset Management AUM as of December 31, 2024.}
^{3 Pensions & Investments, “The Best Places to Work in Money Management” among companies with 1,000 or more employees, December 2024.}

Thomas Metzler
Managing Director, Institutional Sales
metzler.thomas@principal.com
+1.510.427.6490

711 High Street
Des Moines, Iowa 50392

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