Mind the gap : the difference between U.S. and European loan rates

Steffen, Sascha ; Berg, Tobias ; Saunders, Anthony ; Streitz, Daniel

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URL: https://ub-madoc.bib.uni-mannheim.de/40797
URN: urn:nbn:de:bsz:180-madoc-407975
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-018
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: G30 , G20 , G15,
Keywords (English): Loans , corporate debt , fees , market integration , globalization
Abstract: We analyze differences in the pricing of syndicated loans between U.S. and European loans. For credit lines, U.S. borrowers pay significantly higher spreads, but also lower fees, resulting in similar total costs of borrowing in both markets. For term loans, U.S. firms pay significantly higher spreads. While European firms across the rating spectrum issue terms loans, only low quality U.S. firms rely on term loans. U.S. issuers perform worse after loan origination compared to European issuers, which explains 30% of the spread differential. Increasing loan supply by institutional lenders in the U.S. since 2003 eventually fully removed the term loan pricing gap.

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