Pipeline Risk in Leveraged Loan Syndication
What is the economic role played by arrangers of leveraged loans, and what are the risks they face? We provide evidence that arrangers solve a demand discovery problem. Investors have incentives to feign little interest in the loan to obtain better terms. To deter such behavior, arrangers underprice...
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| Veröffentlicht in: | The Review of financial studies 2020-12, Vol.33 (12), p.5660-5705 |
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| container_issue | 12 |
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| container_title | The Review of financial studies |
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| creator | Bruche, Max Malherbe, Frederic Meisenzahl, Ralf R. |
| description | What is the economic role played by arrangers of leveraged loans, and what are the risks they face? We provide evidence that arrangers solve a demand discovery problem. Investors have incentives to feign little interest in the loan to obtain better terms. To deter such behavior, arrangers underprice hot deals and ration investors on cold deals. The risk associated with demand discovery is often shared between borrowers and arrangers. One implication is that to ration investors on cold deals, arrangers retain larger loan shares. This motive for retention is different from the monitoring incentive motive previously considered in the literature. |
| doi_str_mv | 10.1093/rfs/hhaa029 |
| format | Article |
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| source | Jstor Complete Legacy; Oxford University Press Journals All Titles (1996-Current); Business Source Complete |
| subjects | 1999-2015 Fremdkapital Institutioneller Investor Kreditgeschäft Kreditrisiko Unternehmenskooperation USA |
| title | Pipeline Risk in Leveraged Loan Syndication |
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