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Private credit funds, flush with cash and competing more intensely to win lending business, are increasingly giving up key safeguards that protect them in tougher times, Bloomberg News reported. About 20% of private loans in the third quarter had lending agreements known as “covenant-lite,” giving creditors fewer ways to trigger bankruptcies or other restructurings for companies that fall into distress, according to investment bank Lincoln International. That’s up from 10% a year ago. And loans offering lenders better protections with two covenants fell to 30% from 50% over the same period. The shift is making the debt look more like syndicated loans that banks sell to investors, but for lenders there’s a key difference: in the syndicated market, money managers end up with just a slice of any loan, sharing risk with dozens of others. In private credit, lenders including standalone funds and credit arms of buyout fund managers like Blackstone Group Inc. or KKR & Co. make much bigger bets in every transaction as they hang onto the loans, leading to more potential losses if even one borrower falls into trouble. 

A buyout boom fueled by easy money and a looming hike in the capital-gains tax is sweeping Wall Street deal making to highs not seen since before the 2008 financial crisis, the Wall Street Journal reported. Companies have issued $120 billion of “leveraged loans” this year through Sept. 23 to finance corporate buyouts by private-equity firms — just shy of the $124 billion record for the first nine months of the year set in 2007, according to data from S&P Global Market Intelligence’s LCD. Most deals have also gotten bigger. The average leveraged buyout cost about $2.5 billion in debt and equity this year, eclipsing the mean of roughly $2 billion in 2007, according to S&P. The wave has swept up household names like satellite-TV operator DirecTV and a unit of cybersecurity firm McAfee Corp., and it has reintroduced megadeals to the market. Goldman Sachs Group Inc. recently started marketing $7 billion of loans to investors that will be used by a trio of private-equity firms to finance part of their roughly $34 billion takeover of Medline Industries Inc., the largest leveraged buyout in more than a decade. A mix of government policies have primed the LBO frenzy. Easy money and low interest rates have pushed investors toward the high yields that leveraged loans pay. Meanwhile, company owners are trying to cut deals ahead of anticipated tax overhauls.