Increasing concern over debt servicing: Accounting for loan violations

Numerous business analysts are expecting a significant increase in commercial loan covenant violations and related defaults in the near future, due to a variety of factors including rising interest rates, persistent inflation, tightened lending standards, and harsher economic conditions. These violations and defaults may affect a variety of business sectors. The commercial real estate industry (CRE) appears to be especially vulnerable. Covenant violations and defaults can lead to loan modifications, distressed exchanges, and restructurings.