How Private Equity Fuels Non-Bank Lending

Sharjil Haque, Simon Mayer () and Teng Wang
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Simon Mayer: https://scholars.cmu.edu/13302-simon-mayer

No 2024-015, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We show how private equity (PE) buyouts fuel loan sales and non-bank participation in the U.S. syndicated loan market. Combining loan-level data from the Shared National Credit register with buyout deals from Pitchbook, we find that PE-backed loans feature lower bank monitoring, lower loan shares retained by the lead bank, and more loan sales to non-bank financial intermediaries. For PE-backed loans, the sponsor's reputation and the strength of its relationship with the lead bank further reduce the lead bank's retained share and monitoring. Our results suggest that PE sponsor engagement substitutes for bank monitoring, allowing banks to retain less skin-in-the game in the loans they originate and to sell greater loan shares to non-banks.

Keywords: Syndicated Loans; Private Equity; LBO; Bank Monitoring; CLO; Securitization; Loan Sales (search for similar items in EconPapers)
JEL-codes: G00 G10 G30 G32 G33 (search for similar items in EconPapers)
Pages: 48 p.
Date: 2024-03-29
New Economics Papers: this item is included in nep-ban
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2024-15

DOI: 10.17016/FEDS.2024.015

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