Search Results
Conference Paper
The opening of new markets for bank assets
Working Paper
How Do Lead Banks Use Their Private Information about Loan Quality in the Syndicated Loan Market?
Little is known about how lead banks in the syndicated loan market use their private information about loan quality. We formulate and test two hypotheses, the Signaling Hypothesis and Sophisticated Syndicate Hypothesis. To measure private information, we use Shared National Credit (SNC) internal loan ratings, which we make comparable across banks using concordance tables. We find that favorable private information is associated with higher loan retention by lead banks for term loans, consistent with empirical domination of the Signaling Hypothesis, while neither hypothesis dominates for ...
Journal Article
Recent trends in commercial bank loan sales
The dollar volume of commercial bank loan sales rose rapidly in the mid-1980s but has declined equally rapidly over the past few years. This article provides insight into these loan sales trends by looking beyond the aggregate data and separately examining the sales activities of the largest loan sellers and those of all other banks.
Working Paper
EBITDA Add-backs in Debt Contracting: A Step Too Far?
Financial covenants in syndicated loan agreements often rely on definitions of EBITDA that deviate from the GAAP definition. We document the increased usage of non-GAAP addbacks toEBITDA in recent times. Using the 2013 Interagency Guidance on Leveraged Lending, which we argue led to an exogenous increase in non-GAAP EBITDA addbacks, we show that these addbacksincrease the likelihood of loan delinquency and default, and also increase the likelihood of the borrower experiencing a ratings downgrade. Greater use of non-GAAP EBITDA addbacks also makes it more likely that lead arrangers lower their ...
Working Paper
Managing the risk of loans with basis risk: sell, hedge, or do nothing?
Individual loans contain a bundle of risks including credit risk and interest rate risk. This paper focuses on the general issue of banks? management of these various risks in a model with costly loan monitoring and convex taxes. The results suggest that if the hedge is not subject to basis risk, then hedging dominates a strategy of ?do nothing.? Whether hedging dominates loan sales depends on whether it induces reduced monitoring, the net benefit of monitoring, and the reduced tax burden of eliminating all risk via selling. If the hedge is subject to basis risk, then a ?do nothing? strategy ...
Conference Paper
Why commercial banks sell loans: an empirical analysis
Conference Paper
The paradox of loan sales
Conference Paper
The loan asset sales market, what lies ahead?