A pick-up in US leveraged finance issuance this week put covenant-lite structures under the spotlight, as major deals, from Novolex to Opella and Lumen, tested how much flexibility borrowers can still extract from lenders.

While demand for new paper remains strong, the tide may be turning when it comes to how much leeway borrowers can retain in their debt agreements. Investors are increasingly drawing red lines around loose covenants, and sponsors are starting to concede.