Did Securitization Affect the Cost of Corporate Debt?

Charles A. Dice Center Working Paper No. 2010-16

Fisher College of Business Working Paper No. 2010-03-16

43 Pages Posted: 1 Sep 2010 Last revised: 26 Feb 2011

See all articles by Taylor Nadauld

Taylor Nadauld

Brigham Young University

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: February 23, 2011

Abstract

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 witha 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.

Keywords: Securitization Boom, Term Loan B, Term Loan A

JEL Classification: G21, G31

Suggested Citation

Nadauld, Taylor and Weisbach, Michael S., Did Securitization Affect the Cost of Corporate Debt? (February 23, 2011). Charles A. Dice Center Working Paper No. 2010-16; Fisher College of Business Working Paper No. 2010-03-16. Available at SSRN: https://ssrn.com/abstract=1670080 or http://dx.doi.org/10.2139/ssrn.1670080

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

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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