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Did Securitization Affect the Cost of Corporate Debt?

  • Taylor D. Nadauld
  • Michael S. Weisbach

This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. 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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File URL: http://www.nber.org/papers/w16849.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16849.

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Date of creation: Mar 2011
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Publication status: published as Nadauld, Taylor D. & Weisbach, Michael S., 2012. "Did securitization affect the cost of corporate debt?," Journal of Financial Economics, Elsevier, vol. 105(2), pages 332-352.
Handle: RePEc:nbr:nberwo:16849
Note: CF
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