Nonbank Investors and Loan Renegotiations

57 Pages Posted: 4 Jan 2017 Last revised: 30 Aug 2018

See all articles by Teodora Paligorova

Teodora Paligorova

Board of Governors of the Federal Reserve System

João A. C. Santos

Federal Reserve Bank of New York

Date Written: August 28, 2018

Abstract

We document that the structure of syndicates affects term loan renegotiations. Lead banks with large retained shares have a positive effect on renegotiations, while the syndicate diversity among nonbank investors is renegotiation friendly. The latter result derives from the growth of collateralized loan obligations (CLOs) in the syndicated loan market, and the coordination of investment decisions between lead banks and their affiliated CLOs. Our findings highlight previously unrecognized coordination between lead banks and their affiliated CLOs and a novel channel that CLOs support the supply of corporate credit.

Keywords: Corporate loans, CLOs, renegotiations, investor diversity

JEL Classification: G21, G23

Suggested Citation

Paligorova, Teodora and Santos, João A. C., Nonbank Investors and Loan Renegotiations (August 28, 2018). Available at SSRN: https://ssrn.com/abstract=2892068 or http://dx.doi.org/10.2139/ssrn.2892068

Teodora Paligorova (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

João A. C. Santos

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

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