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Did Securitization Affect the Cost of Corporate Debt?

Taylor Nadauld

Brigham Young University

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

February 24, 2011

AFA 2012 Chicago Meetings Paper

This paper investigates whether the securitization of corporate bank loans had an impact on the price of corporate debt. Our results suggest that loan facilities that are subsequently securitized are associated with a 15 basis point lower spread than that of loans that are not subsequently securitized. To identify the particular role of securitization in loan pricing, we employ a difference in differences approach and consider loan characteristics that are associated with the likelihood of securitization. We document that Term Loan B facilities, facilities originated by banks that originate CLOs, and loans of B-Rated firms are securitized more frequently than other loans. 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.

Number of Pages in PDF File: 42

Keywords: Securitization, Cost of Capital, Term Loan B

JEL Classification: G2, G32

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Date posted: March 3, 2011  

Suggested Citation

Nadauld, Taylor and Weisbach, Michael S., Did Securitization Affect the Cost of Corporate Debt? (February 24, 2011). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1768862 or http://dx.doi.org/10.2139/ssrn.1768862

Contact Information

Taylor Nadauld
Brigham Young University ( email )
Provo, UT 84602
United States
Michael S. Weisbach (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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