How Private Equity Fuels Non-Bank Lending

47 Pages Posted: 1 May 2023 Last revised: 4 Feb 2024

See all articles by Sharjil Haque

Sharjil Haque

Board of Governors of the Federal Reserve System

Simon Mayer

Carnegie Mellon University

Teng Wang

Board of Governors of the Federal Reserve System; Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: April 25, 2023

Abstract

We show how private equity (PE) buyouts fuel loan sales and non-bank participation in the U.S. syndicated loan market. Combining loan-level data from the Shared National Credit register with buyout deals from Pitchbook, we find that PE-backed loans feature lower bank monitoring, lower loan shares retained by the lead bank, and more loan sales to non-bank financial intermediaries. For PE-backed loans, the sponsor's reputation and the strength of its relationship with the lead bank further reduce the lead bank's retained share and monitoring. Our results suggest that PE sponsor engagement substitutes for bank monitoring, allowing banks to retain less skin-in-the game in the loans they originate and to sell greater loan shares to non-banks.

Keywords: Syndicated Loans, Private Equity, LBO, Bank Monitoring, CLO, Securitization, Loan Sales

JEL Classification: G21, G23, G24, G29

Suggested Citation

Haque, Sharjil and Mayer, Simon and Wang, Teng, How Private Equity Fuels Non-Bank Lending (April 25, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2023, Available at SSRN: https://ssrn.com/abstract=4429521 or http://dx.doi.org/10.2139/ssrn.4429521

Sharjil Haque (Contact Author)

Board of Governors of the Federal Reserve System ( email )

Simon Mayer

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Teng Wang

Board of Governors of the Federal Reserve System ( email )

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

Bank for International Settlements (BIS)

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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

Paper statistics

Downloads
485
Abstract Views
2,747
Rank
103,722
PlumX Metrics