Keywords

securitization, collateralized loan obligations (CLO), corporate bank loans

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.

Original Publication Citation

“Did Securitization Affect the Cost of Corporate Debt?” Journal of Financial Economics, 2012, Volume 105, Issue 2, Pages 332-352. (Co-author: Michael S. Weisbach)

Document Type

Peer-Reviewed Article

Publication Date

2012

Publisher

Journal of Financial Economics

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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