Lead Arrangers in Syndicated Loans

29 Pages Posted: 9 Mar 2021

See all articles by Aurore Burietz

Aurore Burietz

Catholic University of Lille - IÉSEG School of Management, Lille Campus; LEM CNRS 9221

Paolo Mazza

IESEG School of Management; LEM CNRS 9221

Date Written: March 5, 2021

Abstract

In this paper, we model the first phase of the syndicated loan process by mapping it onto contract bidding theory. Our stylized cost model includes several costs components including the effort made by a candidate lender to be attractive to the borrower. This effort is then modeled as a function of a bidder-specific effect which encompasses past relationships, geographical proximity and industry relatedness as well as the presence of a full-underwriting clause. We also factor in the uncertainty associated with the transaction. We then empirically test the predictions of the model by analyzing the effect of past relationship, geographical and industrial specialization on the level of upfront fees that are reserved to lead arrangers only. All in all, our empirical results are consistent with the existing literature and the predictions of our stylized model.

Keywords: Lead arranger, Syndicated loans, Contract bidding theory, Pre-mandate phase

JEL Classification: G21, G23, G24, D86, C51

Suggested Citation

Burietz, Aurore and Mazza, Paolo, Lead Arrangers in Syndicated Loans (March 5, 2021). Available at SSRN: https://ssrn.com/abstract=3798428 or http://dx.doi.org/10.2139/ssrn.3798428

Aurore Burietz (Contact Author)

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000
France

LEM CNRS 9221 ( email )

Paolo Mazza

IESEG School of Management ( email )

3 Rue de la Digue
Office: A321
Lille, 59 59000
France

HOME PAGE: http://https://sites.google.com/site/paolomazzaphd/

LEM CNRS 9221 ( email )

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