Global syndicated lending during the COVID-19 pandemic

Iftekhar Hasan; Panagiotis N Politsidis; Zenu Sharma

doi:10.1016/j.jbankfin.2021.106121

Global syndicated lending during the COVID-19 pandemic

J Bank Financ. 2021 Dec:133:106121. doi: 10.1016/j.jbankfin.2021.106121. Epub 2021 Mar 16.

Authors

Iftekhar Hasan¹, Panagiotis N Politsidis², Zenu Sharma³

Affiliations

¹ Fordham University, Bank of Finland and the University of Sydney, 45 Columbus Avenue, New York, NY 10023.
² Audencia Business School, Finance Department, 8 Route de la Jonelière, 44312 Nantes, France.
³ The Peter J Tobin School of Business, St John's University, 8000 Utopia Pkwy, New York, NY.

Abstract

This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase in the lender's exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower's exposure. This implies excess interestof about USD 5.16 million and USD 2.37 million respectively for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus's spread, with firms' financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.

Keywords: COVID-19; Cost of credit; G01; G21; G29; G3; JEL classification; Pandemic; Syndicated loans.