Collateral pricing
We examine how collateral affects the cost of debt capital. Using a novel data set of secured debt issued by U.S. airlines, we construct industry-specific measures of collateral redeployability. We show that debt tranches that are secured by more redeployable collateral exhibit lower credit spreads,...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
Elsevier
2010
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/52526 https://orcid.org/0000-0001-6486-333X |
| _version_ | 1811091321262178304 |
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| author | Benmelech, Efraim Bergman, Nittai |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Benmelech, Efraim Bergman, Nittai |
| author_sort | Benmelech, Efraim |
| collection | MIT |
| description | We examine how collateral affects the cost of debt capital. Using a novel data set of secured debt issued by U.S. airlines, we construct industry-specific measures of collateral redeployability. We show that debt tranches that are secured by more redeployable collateral exhibit lower credit spreads, higher credit ratings, and higher loan-to-value ratios—an effect which our estimates show to be economically sizeable. Our results suggest that the ability to pledge collateral, and in particular redeployable collateral, lowers the cost of external financing and increases debt capacity. |
| first_indexed | 2024-09-23T15:00:38Z |
| format | Article |
| id | mit-1721.1/52526 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:00:38Z |
| publishDate | 2010 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | mit-1721.1/525262022-10-01T23:57:32Z Collateral pricing Benmelech, Efraim Bergman, Nittai Sloan School of Management Bergman, Nittai Bergman, Nittai collateral redeployability liquidation collateralized debt obligations airlines We examine how collateral affects the cost of debt capital. Using a novel data set of secured debt issued by U.S. airlines, we construct industry-specific measures of collateral redeployability. We show that debt tranches that are secured by more redeployable collateral exhibit lower credit spreads, higher credit ratings, and higher loan-to-value ratios—an effect which our estimates show to be economically sizeable. Our results suggest that the ability to pledge collateral, and in particular redeployable collateral, lowers the cost of external financing and increases debt capacity. 2010-03-11T20:54:44Z 2010-03-11T20:54:44Z 2008-11 2008-02 Article http://purl.org/eprint/type/SubmittedJournalArticle 0304-405X http://hdl.handle.net/1721.1/52526 Benmelech, Efraim, and Nittai K. Bergman. “Collateral pricing.” Journal of Financial Economics 91.3 (2009): 339-360. https://orcid.org/0000-0001-6486-333X en_US http://dx.doi.org/10.1016/j.jfineco.2008.03.003 Journal of Financial Economics Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf Elsevier author/dept web page |
| spellingShingle | collateral redeployability liquidation collateralized debt obligations airlines Benmelech, Efraim Bergman, Nittai Collateral pricing |
| title | Collateral pricing |
| title_full | Collateral pricing |
| title_fullStr | Collateral pricing |
| title_full_unstemmed | Collateral pricing |
| title_short | Collateral pricing |
| title_sort | collateral pricing |
| topic | collateral redeployability liquidation collateralized debt obligations airlines |
| url | http://hdl.handle.net/1721.1/52526 https://orcid.org/0000-0001-6486-333X |
| work_keys_str_mv | AT benmelechefraim collateralpricing AT bergmannittai collateralpricing |