Aug 14 (Reuters) - A growing number of U.S. companies

are seeking more flexible covenants in their credit agreements

to increase their debt loads while avoiding approvals from all

their existing lenders, according to a new report by ratings

agency Moody's Ratings.

Moody's said in a report released on Thursday that U.S.

corporate borrowers with weaker credit profiles were leaning

harder on their lenders to get more flexibility in agreements to

take out more debt without full consent from existing lenders,

as they struggled to issue new debt in public markets.

Deals with covenant changes that ensured a boost to a

company's capacity to raise more debt - whether for

opportunistic purposes or to avoid liquidity crunches - amounted

to as much as 40% to 300% of their EBITDA, according to

Moody's.

Such dramatic debt load increases present a major credit

risk to existing lenders, especially when borrowers' private

equity sponsors use the added debt for dividend recaps, add-ons

and acquisitions, the ratings agency noted.

Borrowers on several recent deals have sought more flexible

covenants to allow this greater debt capacity, it said, adding

that 10%, or nine of 89 credit agreements, have done so between

the start of 2024 and May 2025.

All of the 10% involved PE-backed borrowers, the report noted.

They included the initial proposed term sheets for debt that was

funding PE firm Turn/River Capital's leveraged buyout of IT

systems provider SolarWinds in March, and KKR's

leveraged buyout in May of derivatives market software

provider OSTTRA.

These recent deals point to a growing trend of borrowers'

"unfettered access" to debt, even those in financial distress,

Moody's highlighted, as lenders in the public debt market face

ever fiercer competition from lenders in the expanding private

credit market.