November 2023

Debt Flexibility

Rhys Bidder, Nicolas Crouzet, Margaret M. Jacobson, Michael Siemer


This paper documents new facts on the modification of bank loans using FR Y-14Q regulatory data on C&I loans. We find that loan-level modifications of key contractual terms, such as interest and maturity, occur at least once for 41 percent of loans. Cross sectional differences in modifications are substantial and amplified by borrower distress. Relative to single-lender loans, syndicated loans are 1.5 times more likely to be modified and interest rate changes are twice as likely. Our findings call into question whether 1) creditor dispersion makes loan modifications more challenging and 2) relationship lending between banks and small borrowers creates more scope for flexibility when borrower-level conditions change.

Keywords: Corporate debt, Renegotiation, SME lending, Relationship lending


PDF: Full Paper

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Last Update: November 29, 2023