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.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.