美聯(lián)儲(chǔ)-私募股權(quán)如何推動(dòng)非銀行貸款

FinanceandEconomicsDiscussionSeries

FederalReserveBoard,Washington,D.C.

ISSN1936-2854(Print)

ISSN2767-3898(Online)

HowPrivateEquityFuelsNon-BankLending

SharjilHaque,SimonMayer,TengWang

2024-015

Pleasecitethispaperas:

Haque,Sharjil,SimonMayer,andTengWang(2024).“HowPrivateEquityFuelsNon-BankLending,”FinanceandEconomicsDiscussionSeries2024-015.Washington:BoardofGovernorsoftheFederalReserveSystem,

/10.17016/FEDS.2024.015

.

NOTE:StafworkingpapersintheFinanceandEconomicsDiscussionSeries(FEDS)arepreliminarymaterialscirculatedtostimulatediscussionandcriticalcomment.TheanalysisandconclusionssetfortharethoseoftheauthorsanddonotindicateconcurrencebyothermembersoftheresearchstafortheBoardofGovernors.ReferencesinpublicationstotheFinanceandEconomicsDiscussionSeries(otherthanacknowledgement)shouldbeclearedwiththeauthor(s)toprotectthetentativecharacterofthesepapers.

HowPrivateEquityFuelsNon-BankLending*

SharjilHaquetSimonMayer?TengWang§

January26,2024

Abstract

Weshowhowprivateequity(PE)buyoutsfuelloansalesandnon-bankparticipa-tionintheU.S.syndicatedloanmarket.Combiningloan-leveldatafromtheSharedNationalCreditregisterwithbuyoutdealsfromPitchbook,wefindthatPE-backedloansfeaturelowerbankmonitoring,lowerloansharesretainedbytheleadbank,andmoreloansalestonon-bankfinancialintermediaries.ForPE-backedloans,thespon-sor’sreputationandthestrengthofitsrelationshipwiththeleadbankfurtherreducetheleadbank’sretainedshareandmonitoring.OurresultssuggestthatPEsponsorengagementsubstitutesforbankmonitoring,allowingbankstoretainlessskin-in-thegameintheloanstheyoriginateandtosellgreaterloansharestonon-banks.

Keywords:SyndicatedLoans;PrivateEquity;LBO;BankMonitoring;CLO;Securi-tization;LoanSales

JELCodes:G00;G10;G30;G32;G33;

*TheviewsexpressedinthispaperarethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheFederalReserveBoardortheFederalReserveSystem.WeareespeciallygratefultoJohanCassel,QuirinFleckenstein,IvanIvanov,andRalfMeisenzahlfordetailedcomments.WewouldliketothankFernandoAvalos,BrunoBiais,YongqiangChu,HansDegryse,JenniferDlugosz,SebastianDoerr,MatthiasEfing,AndrewEllul,FiorelladeFiore,ThierryFoucault,LeonardoGambacorta,SebastianGryglewicz,SebastianHillenbrand,JohanHombert,C′edricHuylebroek,JessicaJeffers,MarcinKacperczyk,JohnKrainer,DavidMauer,DanielNeuhann,JacquesOlivier,StevenOngena,SophieRotermund,FarzadSaidi,AntoinetteSchoar,LukasSchmid,Hyun-SongShin,ChesterSpatt,JaredStanfield,AnnetteVissing-J?rgensen,MikeWeisbach,andKairongXiaoaswellasseminarandconferenceparticipantsattheFederalReserveSystemBankingConference,BIS,ParisDecemberFinanceMeeting2023,PERCConference2023,theFederalRe-serveBoard,KULeuven,andHECParisforusefulcommentsanddiscussions.WealsothankRobertCote

forfoS.rlaaque@

?CarnegieMellonUniversity,TepperSchoolofBusiness.Email:simonmay@§BoardofGovernorsoftheFederalReserveSystem.Email:teng.wang@

1

Tworecentcapitalmarkettrendsaretheriseofprivateequity(PE)andleveragedbuyouts(LBOs),andthegrowingparticipationofnon-bankfinancialintermediaries(suchasCLOsorprivatedebtfunds)increditmarkets,notably,theU.S.syndicatedloanmarket.Thesetwotrendsarenaturallyrelated,asLBOdealsarefinancedtoalargeextentwithsyndicatedloans(

ShivdasaniandWang,

2011)

.Importantly,bothbanks(specifically,leadbanksinsyndicatedlending)andPEsponsorsareactiveintermediaries.PEsponsorsconductduediligence,engagewiththemanagement,andinitiateoperationalorcapitalstructurechangesintheirportfoliocompanies(

KaplanandStromberg,

2009)

.Banksscreenandmonitorborrowers(

Gryglewicz,Mayer,andMorellec,

2024),whileretainingashareoftheloansthey

originatetomaintainsufficientincentives(

GortonandPennacchi,

1995

).

Thispapershowsthataloan’sPEbackingsubstitutesforbankmonitoring,allowingbankstoretainlessskin-in-the-gameintheloanstheyoriginateandtosellgreaterloansharestonon-bankfinancialintermediaries.RelativetocomparablenonPE-backedloans,PE-backedloansfeature(i)lowerbankmonitoring,(ii)lowerloansharesretainedbyleadbanks,and(iii)largerloansharesheldbynon-bankfinancialintermediaries(e.g.,CLOsorprivatedebtfunds).ForPE-backedloans,boththereputationofthePEsponsorandthestrengthofitsrelationshipwiththeleadbankcausefurtherreductionsinmonitoringandloansharesretainedbytheleadbank.OurfindingssuggestthatPEsponsors’actionsandengagementwithportfoliocompaniesreducetheleadbank’s(perceived)expectedlosses,hencereducingthenecessityofbankmonitoring.Overall,PEbuyoutsappeartostimulatenon-bankparticipation,liquidity,andloansalesinthesyndicatedloanmarket.

Forourempiricalanalysis,wecombineadministrativeloan-leveldatafromtheSharedNationalCredit(SNC)register,containingextensiveinformationaboutU.S.syndicatedloanswithaminimumcommitmentof$20Mn,withbuyoutdealsfromPitchbook,allowingustoidentifyPE-backedborrowersandloans.IntheSNCregister,theleadbank(orleadarranger)ofasyndicatedloanisrequiredtoreportdetailedinformationabouttheloan,includingloanownershipshares.Thus,ourcombineddataallowustoobserveloancharacteristics(includinginternalriskassessment),lenderidentity,collateral,leadbanks’estimatesofdefaultprobabilityandlossgivendefault,thedynamicsofbanks’andnon-bankintermediaries’loanownershipshares,andwhetheraloan/borrowerisPE-backed.

Crucially,bankexaminersobtainadditionalinformationforasubsampleofloans,whichallowsus,following

Gustafson,Ivanov,andMeisenzahl

(2021),toconstructatime-varying

measureofactivebankmonitoringusingtextualanalysis.Specifically,aloanisactivelymonitoredifthereisanaudit/inspection/appraisalbyabankinthesyndicateoranexternal

2

firmhiredbythelenders.Ourmeasureindicatesthat,inagivenyear,about20-25%oftheoutstandingloansareactivelymonitoredbybanks.Consistentwithmoralhazardinmonitoring,ahigherloanshareretainedbytheleadbank,referredtoasleadshare,isassociatedwithincreased(active)bankmonitoring.

Wedocumentthreenovelfacts.First,PE-backedloans(i.e.,loanstoPE-backedborrow-ers)aremonitoredlessthannon-PE-backedloans.Second,theleadbankretainsasmallerloanshare(i.e.,leadshare)andsellsagreatershareoftheloanwhentheloanisPE-backed.Themedianleadshareisabout20%forPE-backedloansand25%fornonPE-backedloans.Whenrestrictingthesampletotermloans(astheyaremorecommonlysoldthanotherloantypes(

Blickle,Fleckenstein,Hillenbrand,andSaunders,

2023)),wefindthattheme

-dianleadshareis13%forPE-backedtermloansand22%fornonPE-backedtermloans.Third,greaterloansharesaresoldtoandheldbynon-bankfinancialintermediaries(inshort,non-banks),whentheborrower/loanisPE-backed.Amongloanswithnon-zeronon-bankholdings,themedian(aggregate)loanshareheldbynon-banksiscloseto65%forPE-backedandabout23%fornonPE-backedloans.

Toguideourempiricalanalysis,wedevelopasimplemodelinwhicha(lead)bankoriginatesaloanthatitcanselltonon-bankinvestors.Thebankreducestheexpectedlossassociatedwiththeloan—thatis,theproductofdefaultprobability,lossgivendefault,andexposureatdefault—viamonitoring,butmonitoringiscostlyandsubjecttomoralhazard.Hence,monitoringincreaseswiththebank’sretainedloanshare(“l(fā)eadshare”),capturingitsskin-in-the-game.WeconsiderthatPEsponsors’actions(e.g.,duediligence,engagementwithmanagement,orgovernanceengineering)substituteforbankmonitoringincontainingcreditrisk,whichreducestheoptimallevelofmonitoringforPE-backedloans;ourempiricalanalysisvalidatesthisassumption.Thus,whenaloanisPE-backed,thebankrequireslessmonitoringincentivesviatheretentionofaloanshare.Insummary,themodelpredicts,inlinewithaforementionedempiricalfacts,thatPEsponsorengagementsubstitutesforbankmonitoring,therebyloweringleadshareandspurringloansalestonon-banks.

Motivatedbythetheory’spredictions,weregressourmeasureofbankmonitoring,theleadshare,andmeasuresofnon-bankparticipationonanindicator,capturingwhethertheloanisPE-backed.Wecontrolforloancharacteristics,includingloansize,loantype,matu-rity,utilizationrate,originationdate,andex-antemeasuresofcreditrisk.Additionally,weincludevariousfixedeffects,suchasborrowersector-time(i.e.,industry-time)andimpor-tantly(lead)bank-time.Thus,inourbaselineloan-levelregressions,weeffectivelycompare,atagivenpointintime,observablysimilarloansofthesametypeandsimilarrisklevelis-

3

suedbythesameleadbanktoPE-backedandnonPE-backedborrowersinthesamesector.OurfindingsrevealthatrelativetocomparablenonPE-backedloans,PE-backedloansareassociatedwithlowerbankmonitoringandleadshare,andmoreloansalestonon-banks.

Theeconomicmagnitudeimpliedbyourestimatesisparticularlysignificantwhenfocus-ingontermloans,whicharemorecommonlysoldthanotherloantypes.Fortermloans,aloan’sPEbackingisassociatedwithareductionintheleadsharebyabout2.5percentagepoints,whichcorrespondstoa11%reductionintheleadshare,givenamedianleadshareof22%fornonPE-backedtermloans.Whenassessingtheeffectofprivateequityonnon-bankparticipation,werestrictoursampletoloansthathavenon-zeronon-bankholdings,meaningthatweexcludeilliquidloantypesandloansthatarenotsold.Thesamplethenprimarilyconsistsoftermloans.WefindthatPE-backedloansfeatureapproximately10%highernon-bankparticipation,asmeasuredbythetotalloanshareheldbynon-banksorbyitsdollarvalue,relativetocomparablenon-PE-backedloans.

Accordingtoourtheoryanditsproposedmechanism,PEsponsorengagementshouldreducebankmonitoringandleadsharemoresignificantly,whentheleadbankhasgreaterexpectationsortrustinthesponsor’scapabilitiestosubstituteforitsmonitoring.Consistentwiththisidea,wefindthat(i)highsponsorreputation(basedonpastdeals)anda(ii)stronglender-sponsorrelationship(throughrepeatedlender-sponsorinteractionsinpastLBOdeals)areassociatedwithlowerbankmonitoringandleadshare.

Following

DemirogluandJames

(2010),wecreateameasureofPEsponsorreputation

basedonpastdealvolume.Intuitively,high-reputationsponsorsshouldbemoreexperienced,skilled,orlesscapital-constrained,enhancingtheircapabilitiestoreducethenecessityofbankmonitoringthroughtheirengagement.OurempiricalfindingsrevealthatrelativetootherPE-backedandnonPE-backedloans,loansbackedbyhigh-reputationsponsorsfeaturelowermonitoringandleadshare.AmongPE-backedtermloans,highsponsorreputationisassociatedwithareductioninleadsharebyabout6percentagepoints,whichiseconomicallylargegivenamedianleadshareofabout13%forPE-backedtermloans.

PEsponsorsandlendersofteninteractrepeatedlyinbuyoutdeals,creatingalender-sponsorrelationship(

MalenkoandMalenko,

2015

).Intuitively,astronglender-sponsorrelationshipshouldmitigatelender-sponsorinformationasymmetriesorinducethesponsortoperformactionsthatsubstituteformonitoring.Consequently,thisshouldreducetheleadbank’smonitoringandretainedshare.Totestthishypothesis,wedeviseforagivenlender-sponsorpaira(binary)measureofthestrengthoftheirrelationship.Thismeasureisbasedontheirinteractionsinpastbuyoutdealsand,moreconcretely,onthepasttotal(dollar)

4

loancommitmentsofthelendertofirmsbackedbythesponsor(

IvashinaandKovner,

2011

).Inourloan-levelregressions,weregressourmeasureofmonitoringandleadshareonthemeasureoflender-sponsorrelationshipstrength,whilecontrollingforloancharacteristicsandincludingvariousfixedeffects.Inparticular,weincludefirm-timefixedeffects(

Khwajaand

Mian

,

2008

)toeffectivelycompareataspecificpointintimeobservablysimilarloanstothesamePE-backedborrowermadebydistinctlenders,whodifferintheirrelationshipwiththesponsor.Asfirm-timefixedeffectsaccountforanytime-varyingborrowercharacteristics,includingitsPEbacking,wesidestepissuesrelatedtothenon-randomselectionofPEtargetsandidentifytheeffectsoflender-sponsorrelationshipsonloan-specificoutcomevariables.

OurfindingsconfirmthatforPE-backedloans,astrongerlender-sponsorrelationshipisassociatedwithbothlowermonitoringandleadshare,andaccordinglymoreloansalestonon-banks.AmongPE-backedtermloans,astronglender-sponsorrelationshipcausesareductioninleadsharebyabout6percentagepoints;givenamedianleadshareof13%forPE-backedtermloans,theeconomicmagnitudeislarge.Onecanviewthestrengthofthelender-sponsorrelationshipasameasureoftheintensivemargineffectsofaloan’sPEbacking.Intuitively,alendershouldexpecttheactionsofaPEsponsortomoresignificantlyreducetheneedforitsmonitoringwhenastrongrelationshipwiththesponsorismaintained.Underthisinterpretation,ourresultsshowthataloan’sPEbackingreducesmonitoringandleadshareontheintensivemargin.ThisalsosuggeststhatourbaselinefindingsontheeffectsofprivateequityontheextensivemargindonotmerelyreflectselectionofPEtargetsand,tosomepart,capturethe(causal)effectsofPEsponsorengagement.

Inourtheory,PEsponsors’actionsincreasetheexpectedrecoveryvalueoftheloanandreducebanks’expectedlosses.This,inturn,lowerstheleadbank’sperceivedex-antecreditriskandcurbsitsmonitoringefforts.Empirically,weconfirmthatPE-backedloansareassociatedwithbothlower(i)lossgivendefault,whichisinverselyrelatedtoaloan’srecoveryrate,and(ii)expectedlossesforlenders.Aloan’sexpectedlossistheproductoftheleadbank’sestimatesofprobabilityofdefault,lossgivendefault,andexposureatdefault.ThesequantitiesarereportedbytheleadbankintheSNCdatabaseandthuscaptureitsexpectationsabout(ex-ante)creditrisk.Ourfindingssuggestthatlendersperceive(andreport)lowerex-antecreditriskandexpectedlossesforPE-backedloans.

AlthoughPE-backedloansareassociatedwithlowermeasuresofex-antecreditrisk,theycouldstillperformworseex-post.Interestingly,wefindthatPE-backedloanstendtodefaultmoreoftenthannonPE-backedloans,buttheseeffectsvanishoncewecontrolforaloan’sex-anteprobabilityofdefaultorfirmfixedeffects.WhencomparingPE-andnonPE-backed

5

loanswithsimilarex-antecreditrisk,wedonotfindanysignificantdifferencesindefaultrates.Theworseex-postperformanceofPE-backedloansseemsthereforeattributabletoselectionandnotrelatedtoPEsponsors’engagementassuch.

ProvidedthatPEsponsorengagementsubstitutesforbankmonitoring,theseeffectsshouldbestrongerforloansthatareriskierandmoreinformation-sensitive.Totestthishypothesis,wefollow

Gustafsonetal.

(2021)andusecollateralinformationintheSNCdata

toidentifyloansbackedbyvolatilecollateral(suchasaccountsreceivable,inventories,andsecurities).Allelseequal,theseloansshouldberiskierandmoreinformation-sensitiveandsorequiremoremonitoring.Asexpected,wefindthatthenegativeassociationbetweenaloan’sPEbackingandbankmonitoringisstrongerforloansbackedbyvolatilecollateral.Thisobservationlendsfurthersupporttothemechanismproposedinourtheory.

Ourtheoryalsopredictsthatthesensitivityofmonitoringtoleadsharereflectstheseverityofthemoralhazardproblemregardingbankmonitoring.WeshowthatPE-backedloansareassociatedwithbothlowermonitoringandalowersensitivityofmonitoringtoleadshare.ThisfindingindicatesthatPE-backedloansfeaturelessseveremoralhazardandasymmetricinformationproblemsinloansales.Consequently,PEsponsorsappeartostimulateloansalesbymitigatingmoralhazardandasymmetricinformationinloansales.

Whilealoan’sPEbackingreducesactivebankmonitoring,itcouldbethatPE-backedloansaresimplymonitoredinadifferentway,i.e.,viacovenants(

WangandXia,

2014)

.Importantly,wedonotfindevidencethatforPE-backedloans,thereismorecovenant-basedmonitoringorthatcovenant-basedmonitoringsubstitutesforactivebankmonitoring.Inparticular,PE-backedtermloansevenhavealowernumberofcovenantsandaremoreoftencov-litethancomparablenonPE-backedloans,whilethedifferenceislesspronouncedforcreditlines.ThissuggeststhatthereislessoverallmonitoringforPE-backedloans.

Finally,wehighlighttherobustnessofourfindingsbyemployingcoarsenedexactmatch-ing(CEM),as,e.g,in

Davis,Haltiwanger,Handley,Jarmin,Lerner,andMiranda

(2014).We

matchPE-backedandnonPE-backedloansthataresimilaralongvariousloancharacteristics(loansize,collateraltype,collateralvaluation,maturity,loanrisk)andfirmcharacteristics(industryandlocation).Ourkeyfindingsremainrobustinthematchedsampleanalysis,inthataloan’sPEbackingisassociatedwithbothlowermonitoringandleadshare(i.e.,moreloansalestonon-banks).Inaddition,wedemonstratethatourresultsremainrobusttocontrollingfortheleadbank’sestimateoftheloan’sprobabilityofdefault.Interestingly,whenincludingtheestimatedprobabilityofdefaultinourregression,wefindthatriskierloansareassociatedwithincreasedmonitoringandahigherleadshare,i.e.,fewerloansales.

RelatedLiterature.First,ourworkcontributestotheextensiveliteratureonsyndicated

lendingandloansales.

Sufi

(2007)and

Ivashina

(

2009

)showthattheretentionbytheleadarrangermitigatesasymmetricinformationproblemsinsyndicatedlending

.1

Recentempiricalstudieshighlightthatbankssellsyndicatedloansafterorigination(

Druckerand

Puri

,

2009

;

BordandSantos,

2012;

IraniandMeisenzahl,

2017;

Irani,Iyer,Meisenzahl,and

Peydro

,

2021;

Blickleetal.,

2023;

Chen,Lee,Neuhann,andSaidi,

2023).

Chernenko,Erel,

andPrilmeier

(2022)and

Jang

(2023)studynon-bankdirectlenders

.Non-bankfinancialintermediariesbuysyndicatedloansinthesecondarymarket(

IvashinaandScharfstein,

2010;

Lee,Li,Meisenzahl,andSicilian,

2019;

Lee,Liu,andStebunovs,

2022)

.Related,

Berlin,

Nini,andEdison

(2020)and

Beyhaghi,Nguyen,andWald

(2019)identifyfactorsthathave

contributedtotheriseofnon-banklending,while

Fleckenstein,Gopal,GutierrezGallardo,

andHillenbrand

(2020),

Fleckenstein

(2022),and

Aldasoro,Doerr,andZhou

(2022)focuson

itscyclicality.Theimplicationsofloansalesandsecuritizationonleadbankincentivesandloantermsarestudiedempiricallyin

Benmelech,Dlugosz,andIvashina

(2012),

Bordand

Santos

(2012),

NadauldandWeisbach

(2012),and

WangandXia

(2014),andtheoreticallyin

Gryglewiczetal.

(2024).2

Bruche,Malherbe,andMeisenzahl

(2020)analyzepipelineriskin

loansyndication.Wecontributetothisliteraturebyshowingthatprivateequitystimulatesloansalesandnon-bankparticipationinthemarketforsyndicatedloans.

Ourworkalsorelatestotheliteratureonbankmonitoring,pioneeredbyseminalthe-oreticalwork(see,e.g.,

Diamond

(

1984

)).

Gustafsonetal.

(

2021

)constructameasureofactivebankmonitoringandshowthatmonitoringincreaseswithleadshare,while

Kundu,

Jiang,andXu

(2023)identifylenders’rentextractionduringrenegotiationasamonitor

-ingincentivemechanism.

Cerqueiro,Ongena,andRoszbach

(2016)analyzetherelationship

betweencollateralvaluesandmonitoring.

Heitz,Martin,andUfier

(2022)studythede

-terminantsofbankmonitoringforconstructionloans.

WeitznerandBeyhaghi

(2022)and

Claessens,Ongena,andWang

(2023)provideevidenceforbankinformationproduction,

e.g.,viamonitoring.

WeitznerandHowes

(

2021

)analyzethecyclicalityofbankinforma-tionproduction.

Wang

(2019)demonstratesthatlocalinformationaffectsbanks’decisions

toexpandthroughM&Aorbranching,whichinturnimpactslendingoutcomes.

Blickle,

1Theoreticalworkpredictsthatinsyndicatedlending,theleadarranger(orleadbank)retainsashare

oftheloantomaintainsufficientincentivestoscreenandmonitoringborrowers(see,e.g.,(Diamond,1984;

HolmstromandTirole,1997;Hartman-Glaser,Piskorski,andTchistyi,2012;Gryglewiczetal.,2024))orto

mitigateasymmetricinformationproblemsassociatedwithloansales(Fuchs,Gottardi,andMoreira,2022).

2Focusingonmortgagemarkets,Keys,Mukherjee,Seru,andVig(2010),Purnanandam(2011),Demiroglu

andJames(2012),andBegleyandPurnanandam(2017)study,amongothers,theeffectsofskin-in-the-game,

securitization,andloansalesonoriginatorincentivesandmortgagequality.

6

7

Parlatore,andSaunders

(2021)findthatbanksspecializeandgainindustry-specificinfor

-mationaffectingloantermsandperformance.WeaddtotheliteratureonbankmonitoringandinformationproductionbyshowingthatPEsponsors’actionssubstituteforbankmon-itoringandinformationproduction.Abroaderimplicationisthat,withtheriseofprivateequity,informationproductioninprivatemarketsmayshiftfrombanks(traditionally,themostimportantfinanciersforprivatefirms)towardPEinvestors.

Weaddtotheliteratureontheeffectsofprivateequity.

Axelson,Jenkinson,Str¨omberg,

andWeisbach

(2013)studythedeterminantsofbuyoutleverage.

Fahlenbrach,Rotermund,

andSteffen

(2023)analyzehowLBOfundingstructurechangedaftertheglobalfinancial

crisis.

KaplanandStromberg

(2009)andrecenttheoriesonprivateequity(Malenkoand

Malenko

,

2015;

GryglewiczandMayer,

2022)highlightthatPEsponsorsaffectfirmvalue

andoutcomesthroughoperational,governance,andfinancialengineering

.3

Ivashinaand

Kovner

(2011),

DemirogluandJames

(2010),

ShiveandForster

(2021),

Achleitner,Braun,

Hinterramskogler,andTappeiner

(2012),and

HaqueandKleymenova

(2023)examinehow

PEsponsorsandtheirreputationaffectthetermsofdebtfinancinganddebtcovenants(andtheirviolation)inLBOs.WecontributebyshowingthatPEsponsorengagementreducesexpectedlossesforlendersandthereforesubstitutesforbankmonitoring.

1DataandFacts

Inthissection,wedescribeourdatasources.Wealsoestablishnovelempiricalfactsabouthowbankmonitoring,loansalesandnon-bankparticipationdifferacrossPE-backedandnonPE-backedloans.Inwhatfollows,weusethetermbank,lender,orleadbankinter-changeably.Appendix

A

presentsanoverviewofthevariabledefinitions.

SNCDatabase.Ourprimarydataisloan-leveldatafromtheSharedNationalCredit(SNC)register,whichismaintainedbytheBoardofGovernorsoftheFederalReserveSys-tem,theFederalDepositInsuranceCorporation,andtheOfficeoftheComptrolleroftheCurrency.ThedataprovidesinformationforallsyndicatedloansintheU.S.withamini-mumtotalcommitmentof$20millionandatleastthreefederallysupervisedinstitutionsparticipatinginthesyndicate.Theadministrativeagentofaloan—-theleadarranger

3AlargeempiricalliteraturethenstudiestheeffectsofPEsponsors’actionsonfirmoutcomesandvaluecreation(see,amongothers,

Boucly,Sraer,andThesmar

(2011);

CronqvistandFahlenbrach

(2013);

Harford

andKolasinski

(2014);

BernsteinandSheen

(2016);

Antoni,Maug,andObernberger

(2019);

Aldatmazand

Brown

(2020);

Cohn,Hotchkiss,andTowery

(2022);

Fracassi,Previtero,andSheen

(2022))

.

8

orleadbank—isrequiredtoreportdetailedinformationabouttheloanatregularinter-

vals.Inparticular,itreportstheleadshare(i.e.,theloanshareheldbytheleadbank),theloansharesheldbyallmembersandbanksofaloansyndicate,andtheloanshares

heldbynon-bankfinancialintermediaries.4

TheSNCdatacontaindetailedinformationonlenderidentity,loanterms,loantype,maturity,loanoriginationdate,borrowercharacter-istics,collateral,andloanshares.WeemphasizethattheSNCdatadonotreportloanspreadsorfirm-levelfinancialinformationinasystematicway,sotheyarenotavailableforouranalysis;importantly,neitherloanspreadsnorfirmfinancialinformationarenecessaryforourresearchquestion

.5

Inaddition,aseparatescheduleofSNCdatacontainsinfor-mationonloancovenantsandcovenantcompliance.Ofparticularinterestforouranalysisistheso-calledleadarrangershareorleadshare,whichwedenoteforloanlattimetbyLeadSharel,t.Theleadshareistheshareoftheloan(commitment)retainedbytheleadbank.Itthuscapturestheleadbank’sexposuretoloanperformanceandskin-in-the-game,whichdeterminestheleadbank’smonitoringincentives.Notethattheleadbankistypicallyinchargeofscreeningandmonitoring(

Gustafsonetal.,

2021

),whereasothermembersofthesyndicatetypicallytakeamorepassiverole.Importantly,foragivenloan,weobservetheleadshareateveryreportdatebeforematurity,i.e.,atseve