![]() ![]() The lead arranger shifts lending to less risky borrowers and is more likely to include security and restrictive covenants in its loans. Based on this framework, we argue that prior to the 1982 international debt crisis, it was possible for banks with heavy exposure to troubled debtors to attract rational newcomers in syndicated loans which were, with positive probability, bailout loans. Consistent with a reduced syndication ability, there is a drop in the lead arrangers aggregate level of activity in the loan syndication market. The lead bank receives an additional fee for this service, which involves recruiting the syndicate members and. ![]() We show that self-selecting contracts do not exist, and that there is always a pooling Perfect Bayesian Equilibrium in which late entrants lend to both good and bad types, without borrower type being exposed before final clearing at the terminal time. Some standout examples include working as a mandated lead arranger and bookrunner on debut borrower Chinese internet company Lufax’s 1.29bn syndication at the start of the year, and being the. A lead bank is a bank that oversees the arrangement of loan syndication. The asymmetric information structure gives rise to both signalling and screening issues. ![]() This might hinder its ability to act as a lead arranger in future loan syndications.5 Alternatively, the lead arranger might syndicate a loan with the intention of selling it, i.e. Between the two rounds, a shock separates borrowers into good ones and bad ones, and early entrants acquire information about individual borrower type, while late entrants know only the distribution of borrower types. damage the reputation of the lead arranger. We use a model in which lenders enter the market sequentially in two rounds of lending. This paper explores how asymmetric information about borrower quality among syndicated lenders alters the incentive to refinance illiquid borrowers. Using a sample of 1,270 project finance syndicated loan tranches arranged from 1998 to 2011 and worth over 300 billion, we estimate the causal impact of certification by domestic lead arrangers. ![]()
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