Abstract

http://ssrn.com/abstract=1285058
 
 

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Did Structured Credit Fuel the LBO Boom?


Anil Shivdasani


University of North Carolina Kenan-Flagler Business School

Yihui Wang


Fordham University - Finance Area; Chinese University of Hong Kong

January 3, 2011

Journal of Finance, Forthcoming

Abstract:     
The leveraged buyout (LBO) boom of 2004-2007 was fueled by growth in collaterialized debt obligations (CDOs) and other forms of securitization. Banks that were active in structured credit underwriting lent more for LBOs, indicating that bank lending policies linked the LBO and CDO markets. LBO loans originated by large CDO underwriters were associated with lower spreads, weaker covenants, and greater use of bank debt in deal financing. Loans financed through the structured credit market did not lead to worse LBO deals, overpayment, or riskier deal structures. Our findings suggest that securitization markets altered banks’ access to capital and affected their lending policies and offer an explanation for the recent LBO boom.

Number of Pages in PDF File: 72

Keywords: credit supply, leveraged buyout, collateralized debt obligation, loan sales, bank monitoring

JEL Classification: G31, G32, G34

working papers series


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Date posted: October 16, 2008 ; Last revised: September 22, 2012

Suggested Citation

Shivdasani, Anil and Wang, Yihui, Did Structured Credit Fuel the LBO Boom? (January 3, 2011). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1285058 or http://dx.doi.org/10.2139/ssrn.1285058

Contact Information

Anil Shivdasani
University of North Carolina Kenan-Flagler Business School ( email )
Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

Yihui Wang (Contact Author)
Fordham University - Finance Area ( email )
33 West 60th Street
New York, NY 10023
United States
Chinese University of Hong Kong ( email )
Room 219, KKL Building
Chinese University of HongKong
Shatin, New Territories
Hong Kong
852-26097755 (Phone)
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