Did Securitization Affect the Cost of Corporate Debt?
Charles A. Dice Center Working Paper No. 2010-16
43 Pages Posted: 1 Sep 2010 Last revised: 26 Feb 2011
Date Written: February 23, 2011
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: Suggested Citation