The Myth of the Lead Arranger’s Share

39 Pages Posted: 7 May 2020

See all articles by Kristian Blickle

Kristian Blickle

Federal Reserve Banks - Federal Reserve Bank of New York

Quirin Fleckenstein

New York University (NYU) - Leonard N. Stern School of Business

Sebastian Hillenbrand

New York University (NYU) - Leonard N. Stern School of Business

Anthony Saunders

New York University - Leonard N. Stern School of Business

Date Written: May 2020

Abstract

We make use of Shared National Credit Program (SNC) data to examine syndicated loans in which the lead arranger retains no stake. We find that the lead arranger sells its entire loan share for 27 percent of term loans and 48 percent of Term B loans, typically shortly after syndication. In contrast to existing asymmetric information theories on the role of the lead share, we find that loans that are sold are less likely to become non-performing in the future. This result is robust to several different measures of loan performance and is reflected in subsequent secondary market prices. We explore syndicated loan underwriting risk as an alternative theory that may help explain this result.

Keywords: syndicated lending, loan sales, lead arranger

JEL Classification: G21, G24, G30

Suggested Citation

Blickle, Kristian and Fleckenstein, Quirin and Hillenbrand, Sebastian and Saunders, Anthony, The Myth of the Lead Arranger’s Share (May 2020). FRB of New York Staff Report No. 922, Available at SSRN: https://ssrn.com/abstract=3594525 or http://dx.doi.org/10.2139/ssrn.3594525

Kristian Blickle (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Quirin Fleckenstein

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Sebastian Hillenbrand

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

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