Mind the gap: The difference between U.S. and European loan rates

Tobias Berg, Anthony Saunders, Sascha Steffen and Daniel Streitz

No 16-018, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We analyze differences in the pricing of syndicated loans between U.S. and European loans. For credit lines, U.S. borrowers pay significantly higher spreads, but also lower fees, resulting in similar total costs of borrowing in both markets. For term loans, U.S. firms pay significantly higher spreads. While European firms across the rating spectrum issue terms loans, only low quality U.S. firms rely on term loans. U.S. issuers perform worse after loan origination compared to European issuers, which explains 30% of the spread differential. Increasing loan supply by institutional lenders in the U.S. since 2003 eventually fully removed the term loan pricing gap.

Keywords: loans; corporate debt; fees; market integration; globalization (search for similar items in EconPapers)
JEL-codes: G15 G20 G30 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-bec and nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Mind the Gap: The Difference between U.S. and European Loan Rates (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:16018

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