Open Access

Issam Hallak

• Syndicated loans and the number of lending relationships have raised growing attention. All other terms being equal (e.g. seniority), syndicated loans provide larger payments (in basis points) to lenders funding larger amounts. The paper explores empirically the motivation for such a price discrimination on sovereign syndicated loans in the period 1990-1997. First evidence suggests larger premia are associated with renegotiation prospects. This is consistent with the hypothesis that price discrimination is aimed at reducing the number of lenders and thus the expected renegotiation costs. However, larger payment discrimination is also associated with more targeted market segments and with larger loans, thus minimising borrowing costs and/or attempting to widen the circle of lending relationships in order to successfully raise the requested amount. JEL Classification: F34, G21, G33 This version: June, 2002. Later version (october 2003) with the title: "Why Borrowers Pay Premiums to Larger Lenders: Empirical Evidence from Sovereign Syndicated Loans" : http://publikationen.ub.uni-frankfurt.de/volltexte/2005/992/