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Pipeline Risk in Leveraged Loan Syndication
Leveraged term loans are typically arranged by banks but distributed to institutional investors. Using novel data, we find that to elicit investors' willingness to pay, arrangers expose themselves to pipeline risk: They have to retain larger shares when investors are willing to pay less than expected. We argue that the retention of such problematic loans creates a debt overhang problem. Consistent with this, we find that the materialization of pipeline risk for an arranger reduces its subsequent arranging and lending activity. Aggregate time series exhibit a similar pattern, which suggests ...
Leveraged Bank Loan versus High Yield Bond Mutual Funds
Since the financial crisis, the markets for Bank Loan (BL) and High Yield Bond (HYB) mutual funds (MFs) have grown significantly, with assets under management increasing from $19 billion and $75 billion to close to $117 billion and $225 billion, respectively, as of December 2018. This short paper characterizes the universe of BL MFs and compare it against that of HYB MFs on several dimensions. We document that BL and HYB MFsâ?? respective market share of leverage loans (LL) and high yield (HY) corporate bonds outstanding increased since the mid-2000s. We also show that in terms of portfolio ...