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Did securitization affect the cost of corporate debt?

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  • Nadauld, Taylor D.
  • Weisbach, Michael S.

Abstract

This paper investigates whether the securitization of corporate bank loan facilities had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 17 basis point lower spread than that of facilities that are not subsequently securitized. We consider facility characteristics that are associated with the likelihood of securitization and estimate the extent to which these characteristics are related to spreads. We document that Term Loan B facilities, facilities of B-rated firms, and facilities originated by banks that originate CLOs are securitized more frequently than other facilities. Spreads on facilities estimated to be more likely to be subsequently securitized have lower spreads than otherwise similar facilities. The results are consistent with the view that securitization caused a reduction in the cost of capital.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 105 (2012)
Issue (Month): 2 ()
Pages: 332-352

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Handle: RePEc:eee:jfinec:v:105:y:2012:i:2:p:332-352

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Web page: http://www.elsevier.com/locate/inca/505576

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Keywords: Securitization; Collateralized loan obligations (CLO); Corporate bank loans;

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References

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Citations

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Cited by:
  1. Lim, Jongha & Minton, Bernadette A. & Weisbach, Michael S., 2014. "Syndicated loan spreads and the composition of the syndicate," Journal of Financial Economics, Elsevier, vol. 111(1), pages 45-69.
  2. Jeroen Hessel & Jolanda Peeters, 2011. "Housing bubbles, the leverage cycle and the role of central banking," DNB Occasional Studies 905, Netherlands Central Bank, Research Department.
  3. Krainer, Robert E., 2012. "Regulating Wall Street: The Dodd–Frank Act and the New Architecture of Global Finance, a review," Journal of Financial Stability, Elsevier, vol. 8(2), pages 121-133.
  4. Norden, Lars & Silva Buston, Consuelo & Wagner, Wolf, 2014. "Financial innovation and bank behavior: Evidence from credit markets," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 130-145.
  5. Gary Gorton & Andrew Metrick, 2012. "Securitization," NBER Working Papers 18611, National Bureau of Economic Research, Inc.
  6. Haselmann, Rainer & Wachtel, Paul, 2011. "Foreign banks in syndicated loan markets," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2679-2689, October.

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