In financial markets, it’s an unusually ill wind that blows nobody any good. The souring of sentiment in credit markets has made life difficult for CVC but yesterday helped Imperial Tobacco to secure a rival offer for Altadis. CVC’s bankers got cold feet, worried that the “covenant-lite” loan negotiated with the private equity group might not be a good idea. Alliance Boots is also having problems syndicating its own £9 billion of cov-lite debt, loans where lenders do not have the normal powers to call the money in if things start to go wrong.

It’s possible that this may just be a lull, that cov-lite will come back into fashion, with borrowers again able to call the shots, or at least reduce the strings – “cov-loose”. More likely, the era of cov-lite is already passing. The risk is already sitting on someone’s balance sheet: $97 billion of cov-lite loans were issued in the first six months of 2007, according to Standard & Poor’s. Two facts about the cov-lite phenomenon are unpalatable when brought together. Four fifths of all cov-lite borrowers are rated single-B or worse for credit quality. A third of single-B borrowers default at some stage. Cov-lite is fading; it’s back to cov-lovely.

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