FRIC/Finance Seminar with Christopher James, UF Warrington College of Business
The Department of Finance and FRIC, Center for Financial Frictions, are proud to announce the upcoming online seminar with Christopher James, UF Warrington College of Business.
Christopher James will present:
Contracting Costs and Reputational Contracts
Reputational capital is a frequently cited attribute of private equity transactions. In this paper we construct a simple model to illustrate the relationship between reputational capital, covenants and loan spreads in the leveraged loan market. Our model predicts that reliance on reputational capital varies inversely with a sponsor’s past loan performance and the efficiency of the enforcement formal contracts terms. Our model also predicts that for sponsored deals, spreads will be lower on Cov-Lite loans than loans with maintenance covenants. Using a large sample of leveraged loans originated between 2005 and 2018, we find evidence consistent with these predictions.
Location and sign up:
This is an online seminar on Zoom
Please contact us in order to sign up.