Relationships between large customers and suppliers expose lenders to additional risks. These risks may force lead agents to retain a larger share of syndicated loans, reducing loan-level diversification, and, in turn, increasing the required interest rate spread. Consistent with this view, we find that borrowers’ dependence on a few larger customers or suppliers positively affects the cost of the loans indirectly through the loan structure. Instead, we do not observe a direct cost associated with large customer-supplier links, suggesting that lead agents do not increase the interest rate spread as compensation for the additional risks of dealing with borrowers with large customer-supplier links per se. Finally, we document an inverted U-shaped relationship between the length of the large customer-supplier link and the loan share held by the lead agent.

Croci, E., Degl'Innocenti, M., Zhou, S., Large customer-supplier links and syndicate loan structure, <<JOURNAL OF CORPORATE FINANCE>>, 2021; 66 (February): 101844-N/A. [doi:10.1016/j.jcorpfin.2020.101844] [https://hdl.handle.net/10807/166947]

Large customer-supplier links and syndicate loan structure

Croci, Ettore;
2021

Abstract

Relationships between large customers and suppliers expose lenders to additional risks. These risks may force lead agents to retain a larger share of syndicated loans, reducing loan-level diversification, and, in turn, increasing the required interest rate spread. Consistent with this view, we find that borrowers’ dependence on a few larger customers or suppliers positively affects the cost of the loans indirectly through the loan structure. Instead, we do not observe a direct cost associated with large customer-supplier links, suggesting that lead agents do not increase the interest rate spread as compensation for the additional risks of dealing with borrowers with large customer-supplier links per se. Finally, we document an inverted U-shaped relationship between the length of the large customer-supplier link and the loan share held by the lead agent.
2021
Inglese
Croci, E., Degl'Innocenti, M., Zhou, S., Large customer-supplier links and syndicate loan structure, <<JOURNAL OF CORPORATE FINANCE>>, 2021; 66 (February): 101844-N/A. [doi:10.1016/j.jcorpfin.2020.101844] [https://hdl.handle.net/10807/166947]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/166947
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