The Impact of Private Equity Sponsors on Syndicated Loans

Quarterly Journal of Finance and Accounting, Volume 54 Issue 3-4 Pages 101-136, Summer-Autumn 2016

Posted: 21 May 2020

See all articles by Kenneth N. Daniels

Kenneth N. Daniels

Daniels Foundation for Impact Investments and Development

Date Written: April 24, 2016

Abstract

Sponsored loans are issued with the assistance of private equity firms, which negotiate terms on behalf of the borrower. We analyze the impact of engaging private equity sponsors on the cost of syndicated loans and the value added by loan sponsors. We find that sponsorship is associated with complex transactions with syndicates, issues with greater degree of information asymmetry and issues without covenants and lower credit ratings. As such, the cost of the loans with sponsors is higher on the average than those without sponsors. Stock price reaction to syndicated loans is positive and significant, and it is more pronounced for sponsored syndicated loans. Although sponsored debts cost more than non-sponsored debts, the sponsors help to bring the debt issue to the market, which might not happen otherwise.

Keywords: Private Equity, Syndicated Loans

Suggested Citation

Daniels, Kenneth N., The Impact of Private Equity Sponsors on Syndicated Loans (April 24, 2016). Quarterly Journal of Finance and Accounting, Volume 54 Issue 3-4 Pages 101-136, Summer-Autumn 2016, Available at SSRN: https://ssrn.com/abstract=3584067

Kenneth N. Daniels (Contact Author)

Daniels Foundation for Impact Investments and Development ( email )

New Jersey, NJ 07018
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
145
PlumX Metrics