Australia needs cheaper sources of term debt funding than syndicated loans, says expert
Dr Philip Bayley, Doctor of Philosophy, Monash University will present his thought provoking research on the Australian syndicated loan and corporate debt markets at the Australian Centre for Financial Studies (ACFS) on 7 May 2014.
In his speech he will look at factors influencing access and the price of funding in the syndicated loan and corporate bond markets.
“In a post-GFC environment where companies are seeking to diversify sources of term debt funding and seeking advice on the options available, this presentation is very topical,” says Dr Bayley.
Derived from research undertaken on the impact of the syndicated loan market on the development of the domestic corporate bond market, it is shown that borrower financial characteristics and product features will influence a choice between syndicated loans and corporate bonds for term debt funding.
“Oligopolistic competition is found to exist between the four major banks but the syndicated loan market operates under conditions of near perfect competition.
Nevertheless, corporate bonds are found to be a cheaper source of term debt funding than syndicated loans, for those companies that can access the corporate bond market. However, the pricing of syndicated loans will be competitive when corporate bond issuance is an option.”
“No evidence is found of loss-leader pricing of syndicated loans but borrowers without term debt funding options are at risk of being “held-up” by their bankers. In this respect borrowers without a credit rating will incur a significant economic cost on their term debt funding.”
Time: 10:00am to 11:00am
Level 46, Rialto South Tower, 525 Collins Street, Melbourne
The Australian Centre for Financial Studies (ACFS) facilitates industry-relevant, rigorous research and independent commentary. Drawing on expertise from academia, industry and government, ACFS promotes thought leadership in the financial sector.
As specialists in leading edge finance and investment research, ACFS aims to boost the global credentials of Australia’s finance industry, bridging the gap between research and industry, and supporting Australia as an international centre for finance practice, research and education.
Media contact details:
Professor Deborah Ralston
Professor of Finance, Monash University
Executive Director, Australian Centre for Financial Studies
M: +61 419 650 318