The Syndicate Structure of Securitized Corporate Loans

Abstract

Securitized loans have lower lead bank shares but larger shares held by non-CLO institutional investors than non-securitized loans. The result can largely be explained by their degree of information asymmetry and credit risk. We find that lead banks increase their holdings after a non-securitized loan becomes securitized, but they do not reduce financial exposure to securitized facilities during the boom of the CLO market. Furthermore, we find that securitized loans do not perform differently from similar non-securitized loans. We conclude that differences in syndicate structure are likely shaped by participants’ investment preference rather than a manifestation of adverse selection.

Keywords: Securitization, Lead Bank Share, Information Asymmetry, Syndicate Structure

JEL Classification: G21, G23, G32