Journal of Financial Economics Vol. 111 No. 1 2014
Syndicated loan spreads and the composition of the syndicate
Abstract
During the past decade, non-bank institutional investors are increasingly taking larger roles in the corporate lending than they historically have played. These non-bank institutional lenders typically have higher required rates of return than banks, but invest in the same loan facilities. In a sample of 20,031 leveraged loan facilities originated between 1997 and 2007, facilities including a non-bank institution in their syndicates have higher spreads than otherwise identical bank-only facilities. Contrary to risk-based explanations of this finding, non-bank facilities are priced with premiums relative to bank-only facilities in the same loan package. These non-bank premiums are substantially larger when a hedge or private equity fund is one of the syndicate members. Consistent with the notion that firms are willing to pay a premium when loan facilities are particularly important to them, the non-bank premiums are larger when borrowing firms face financial constraints and when capital is less available from banks.
- DOI
- 10.1016/j.jfineco.2013.08.001
- Volume
- 111
- Issue
- 1
- Pages
- 45-69
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref