In today's economic environment, the investors' search for yield has been well documented, as the demand for debt investments has outstripped supply. This has increased the pressure to limit debtholders' protections. Coupled with price compression, this trend has helped reduce the risk to private equity firms and other buyers in making acquisitions. The use of "covenant-lite" debt structures gives buyers more latitude in dealing with acquired businesses.
Historically, high-yield debt has required only that a company satisfy a financial covenant as a condition of entering into a transaction, typically the incurrence of additional debt.