Margin ratchets and ticking fees, for example, have come back under the microscope. Typically, loan docs contain two margin ratchets, where real deleveraging leads to a lower margin, leading to lower funding costs. Towards the end of 2019, banks tried to push for faster triggers or the use of adjusted ebitda in triggers, or for extra ratchets.

Ticking fees have also been an area of discussion. When managers commit to a loan, it may not get funded for four months, during which time they are not earning a coupon. The battle is over what lenders earn for that commitment. Fees could start at zero, then become 50% of the contracted funded margin and later 100%.

“It’s nuances like that which tightened in April/May, but some banks have tried to get aggressive on them again… I didn’t think we would even be having these conversations now,” says Rainbow.

Despite lingering concerns for lenders, European loan volumes surpassed expectations at €58 billion in the second quarter.

“Most of that Q2 issuance was driven by big deals that were already in the pipeline,” says Rainbow. “It’s great we don’t have a stuck pipeline overhanging the market, but the counter is that there’s nothing much from known M&A still to come, although there is talk about a potential pick-up in activity.”