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| Author: | Benmelech, E. Bergman, N.K. |
| Title: | Collateral pricing |
| Journal: | Journal of Financial Economics
2009 : MAR, VOL. 91:3, p. 339-360 |
| Index terms: | finance airlines pricing liquidation debt capital costs USA |
| Language: | eng |
| Abstract: | This study explores how collateral affects the cost of debt capital. Using a data set of secured debt issued by U.S. airlines, industry-specific measures of collateral (here as: coll.) redeployability are built. It is shown that debt tranches that are secured by more redeployable (as: redepl.) coll. exhibit lower credit spreads, higher credit ratings, and higher loan-to-value ratios. The results suggest that the ability to pledge coll., and especially redepl. coll., lowers the cost of external financing and increases debt capacity. |
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