Covenant-lite (cov-lite, for short) loans have come to dominate the leveraged loan market since the end of the Great Recession, an economic catastrophe the financial world has seemed to have learned nothing from.

To recap the Great Recession in extremely cursory fashion, recall that in the early- to mid-2000s, banks began to issue subprime loans to people with limited or poor credit and then packaged those subprime mortgages into collateralized debt obligations. In conjunction with increased housing speculation, this massive spike in subprime lending led the housing market to crash as Americans defaulted on their adjustable-rate mortgages in droves, and it was ultimately revealed that CDOs had been given credit ratings that sorely failed to reflect their high risk.