LONDON, Sept 14 (Reuters) - Global securities regulators have proposed tightening how the leveraged loan market operates to tackle "vulnerabilities" after a prolonged period of low interest rates led to deteriorating standards.
Leveraged loans are loans extended to companies that already have high debt, and therefore are at a higher risk of default.
Global securities watchdog IOSCO said it had identified "some vulnerabilities in the leveraged loan and collateralized loan obligation markets which may be exacerbated by the behavior of certain participants and market practices."
Covenant-lite loans now make up 90% of the leveraged loan market, up from just 1% in 2000, IOSCO said in a public consultation paper on its proposed new guidance.
U.S. companies have raised more money in private markets than in public markets in each year since 2009, it added.
Persons:
IOSCO, Huw Jones, Mark Potter
Organizations:
Global, Investors, Thomson