Taking the Lead: When Non-Banks Arrange Syndicated Loans

SAFE Working Paper No. 100

71 Pages Posted: 5 May 2015

Date Written: April 2015


In the mid-1990s, institutional investors entered the syndicated loan market and started to serve borrowers as lead arrangers. Why are non-banks able to compete for this role against banks? How do the composition of syndicates and loan pricing differ among lead arrangers? By using a dataset of 12,847 leveraged loans between 1997 and 2012, I aim to answer these questions. Non-banks benefit from looser regulatory requirements, have industry expertise which helps them in the screening and monitoring of borrowers and focus on firms that ask for loans only instead of additional cross-selling of other services. I can show that non-banks specialize on more opaque and less experienced borrowers, are more likely than banks to choose participants that help to reduce potentially higher information asymmetries and earn 105 basis points more than banks.

Keywords: Non-bank lead arrangers, syndicated loans, spread premium

JEL Classification: G21, G23, G32

Suggested Citation

Grupp, Marcel, Taking the Lead: When Non-Banks Arrange Syndicated Loans (April 2015). SAFE Working Paper No. 100, Available at SSRN: https://ssrn.com/abstract=2602196 or http://dx.doi.org/10.2139/ssrn.2602196

Marcel Grupp (Contact Author)

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323

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