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‘People Started Panicking’: Loan Investors Just Saw Costly Flaw

April 29, 2021, 11:00 AM

It was only a few bungled words in hundreds of pages of legalese. But they could end up costing leveraged-loan investors in the U.S. billions of dollars in interest payments. And it would have been much more had an analyst not spotted the problem.

“People were not paying attention,” said Covenant Review’s Ian Walker, who put a spotlight on the shortcoming two months ago. “Then people started panicking.”

The issue stems from the fact that the London interbank offered rate, or Libor, which helps set the level of interest payments in the $1.2 trillion industry, is going away and being ...