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Advisor(s)
Abstract(s)
This paper investigates
which factors determine the pricing of loans in
LBOs,
using a worldwide sample of
12,673
syndicated loans
closed during the 2000
-
2013 period
.
We find that
spreads and
pricing processes differ
significantly
in market
-
based
versus
bank
-
based financial systems
as well as in
the
U.S.
vis
-
à
-
vis
W.E.
In
the
pre
-
crisis
period
borrowers in market
-
based financial systems face higher spreads (33.59 bps) than those
in
bank
-
based financial systems and loans closed in common law countries are associated with higher
spreads
(
50.71 bps
)
than those closed in civil law countries
. D
uring the crisis period only loans in
common law legal systems are associated with higher
spreads
.
In line with Carey and Nini’s (2007)
findings
,
w
e
show
that
U.S. borrowers
face
higher spread
s
than W.E. borrowers.
We
also find
that
the
pric
ing of loans in LBOs depends mainly on marketability and default factors
and that
acquired firms
with a
h
igher cash flow potential and asset tangibility face lower spreads.
Finally,
a robust convex relationship
between spread and maturity
is found for loans in LBOs
.
Description
Keywords
Loan pricing LBOs Financial crisis Term structure of credit spreads
Citation
Pinto, J., Pacheco, L., Alves, P., Cunha, R. (2016). How banks price loans in leveraged buy-outs: an empirical analysis of spreads determinants. Working papers: Economics. N.º 4, 47 p.