US government agencies have opened the door to bigger, more highly leveraged loans backing private equity buyouts after clarifying that supervisory guidance is not a rule in mid-September.

The US loan market has treated leveraged lending guidance as a rule since it was updated in 2013 as regulators tried to curb systemic risk. Many banks received warnings about deals that the agencies viewed as non-compliant.

Some banks are producing more aggressive loans as the market heats up to cater to red-hot investor demand for floating-rate debt, and that may pick up even more now that regulation does not carry the weight of a law.

READ FULL ARTICLE HERE