Global Syndicated Lending during the COVID-19 Pandemic
82 Pages Posted: 15 Oct 2020 Last revised: 1 Jul 2021
Date Written: March 13, 2021
This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase the lender’s exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower’s exposure. This renders firms subject to a burden of about USD 5.16 million and USD 2.37 million respectively in additional interest expense for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus’s spread, with firms’ financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.
Keywords: Syndicated loans, Cost of credit, COVID-19, Pandemic
JEL Classification: G01, G21, G29, G3
Suggested Citation: Suggested Citation