Some of the most controversial financing practices of the credit-bubble years – including “cov lite” loans, Pik toggle notes and dividend recap exercises – have returned to Wall Street, stoking fears that debt markets are overheating. The techniques fell into disrepute in the financial crisis because they were based on the same rosy expectations that encouraged borrowers to assume crippling levels of debt. The reappearance of such instruments in recent weeks has stirred concerns that government efforts to stimulate lending are encouraging lenders to take positions based on “best-of-all-possible-worlds” assumptions.

This entry was posted by Gwen Robinson on Wednesday, December 2nd, 2009 at 4:38 and is filed under Capital markets. Edit this entry.