The Bottom Line™:

• European leveraged loans often incorporate provisions that delay or prevent Events of Default during unexpected or uncontrollable events.
• What began as temporary, COVID-specific relief has evolved into standing contractual protections applicable to a wide range of external disruptions.
• Event-driven relief may postpone or prevent lenders’ recourse precisely as credit risk escalates.
• In this report, we analyse common event-driven relief mechanisms and explain their implications.
• We also discuss recent attempts to extend all grace periods during an exceptionally broad range of qualifying events.