Investor advocate law firm Dimond Kaplan & Rothstein, P.A is investigating investment losses in Eagle Point Credit Company securities. Eagle Point may have invested in risky covenant-lite loans and some brokers and brokerage firms may have recommended and sold risky Eagle Point investments to risk-averse investors.

What is Covenant Lite Loan?

A covenant-lite loan is a leveraged loan that has fewer protections for the lender (the investor in the security) and fewer restrictions on the borrower (the issuer of the security) regarding payment terms, income requirements, and collateral. Covenant lite loans are typically used for leveraged buyouts and other large, sophisticated loan transactions. These loans often are packaged into collateralized loan obligations (CLOs) before they are sold to investors.

By contrast, traditional loans often have protective covenants that protect the lender, including financial maintenance tests that measure the borrower’s ability to service their debt and restrictions on dividend payments to stockholders if loan payments are not being made. As a result of the lower restrictions, covenant lite loans generally are more risky than traditional loans and are rated below investment grade.

Eagle Point Investments

DKR understands that Eagle Point typically invested a significant percentage of its capital in risky tranches of collateralized loan obligations (CLO). Those tranches can receive higher promised payouts, but they are the first to take on defaults and losses when borrowers miss their loan payments. Eagle Point securities have suffered substantial losses since the market declined in March 2020. 

Speak with a Securities Fraud Attorney

If you were not willing to invest in risky securities and your broker recommended Eagle Point investments or other investments in covenant lite loans, you may have a valid claim to recover your investment losses. Dimond Kaplan & Rothstein, P.A. has vast experience representing institutional and individual investors who have lost money as a result of the negligence or misconduct of brokers and brokerage firms. DKR will aggressively pursue claims to recover your investment losses.

Contact Dimond Kaplan & Rothstein Today 

Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. to schedule a FREE case evaluation. Our offices are located in Los AngelesNew YorkDetroitWest Palm BeachNaples and Miami, and we represent clients nationwide. Translation services are available.

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