FIN 701 Study Guide - Syndicated Loan, Leveraged Buyout, Loan Sale
12 Nov 2013
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Bank loan sale: sale of a loan originated by fi with or without recourse to an outside buyer. Loan agreements contain a clause that allows fi to sell loan to another buyer, sometimes without having to notify the borrower of the sale. Recourse: ability of a loan buyer to sell the loan back to the originator if it goes bad. Loan sales market has three segments: two involve sale and trading of domestic loans, while he third involves emerging- market loan sales and trading. Traditional short-term segment of market, fis sell loans with short maturities, often one to three months. Loan sales are similar to commercial paper but have yields that are 1 to 10 basis points above those of commercial paper of similar rating: key characteristics of short-term loan sales market. Has yields closely tied to commercial paper rate. Issued for short term (90 days or less) Sold in units of million and up.
