Pipeline Risk in Leveraged Loan Syndication

Frederic Malherbe, Max Bruche and Ralf R Meisenzahl

No 11956, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Leveraged term loans are typically arranged by banks but distributed to institutional investors. Using novel data, we find that to elicit investors' willingness to pay, arrangers expose themselves to pipeline risk : They have to retain larger shares when investors are willing to pay less than expected. We argue that the retention of such problematic loans creates a debt overhang problem. Consistent with this, we fi nd that the materialization of pipeline risk for an arranger reduces its subsequent arranging and lending activity. Aggregate time series exhibit a similar pattern, which suggests that the informational friction we identify could amplify the credit cycle.

Keywords: Syndicated loans; Leveraged loans; Pipeline risk; Lead arranger share; Debt overhang (search for similar items in EconPapers)
JEL-codes: G23 G24 G30 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://cepr.org/publications/DP11956 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Pipeline Risk in Leveraged Loan Syndication (2020)
Working Paper: Pipeline risk in leveraged loan syndication (2017)
Working Paper: Pipeline Risk in Leveraged Loan Syndication (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11956

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11956

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().