In this paper, we try to understand which firms managed to maintain a satisfactory level of funding, despite of the crisis. Which firms managed to obtain a satisfactory level of spread, of amount and of maturity? We want to verify if a previous relationship between the firm and the investment bank of the syndicate improves the loan characteristics (amount, spread and maturity) during a financial crisis.
Some articles focus on what happened during the financial crisis 2008 (for instance Ivashina and Scharfstein, forthcoming), but as far as we know, they only consider bank loan, not syndicated loans. Some articles show that a previous relationship between the firm and the top-arranger bank decreases the spread (for instance Bosch 2007), but they don’t focus on this point, and they don’t consider what happened during the financial crisis.
We use a sample of 4000 syndicated loans granted in USA, Canada and Europe in 2008. Our database comes from Dealscan. We built several original proxies of the relationship between the firm and the top-arranger banks of the syndicate. We considered all the deals between 2003 and 2007 to find out the previous top-arranger banks. We use simultaneous equations to explain the spread, the amount and the maturity of the loans.
First, we consider the 4000 deals of 2008. As expected, we find that the number of syndicated loans a firm has obtained between 2003 and 2007 increases the amount granted in 2008, and the maturity, but decreases the spread. Then, we restrict our sample to the loans obtained by firms that had obtained a loan before 2008. As expected, we find that when a firm has kept the same arranger from 2003 to 2008, he benefits from a lower spread.
Bibliography
Bosch O. (2007), “Information Asymmetry and the Pricing of Private Debt: Evidence from European Syndicated Loans”, EFA 2007 Ljubljana Meetings Paper
Ivashina, V. and D. Scharfstein (forthcoming) « Bank lending during the financial crisis of 2008 », Journal of Financial Economics