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Determinants of Secondary Market Prices for Developing Country Syndicated Loans

Ekkehart Boehmer and William L. Megginson
The Journal of Finance
Vol. 45, No. 5 (Dec., 1990), pp. 1517-1540
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328748
Stable URL: http://www.jstor.org/stable/2328748
Page Count: 24
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Determinants of Secondary Market Prices for Developing Country Syndicated Loans
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Abstract

This paper presents our investigation of the factors that determine secondary market prices of developing country syndicated loans. Trading volume in this market has almost doubled yearly from 1985 to 1988 while average market prices declined from 73% to 41% of par value during the same period. We find that loan values depend on a country's solvency rather than its liquidity and show that a country's adoption of a debt conversion program significantly decreases its loans' market prices. Furthermore, the debt moratoria by Brazil and Peru, as well as the developing-country-specific provisions made by U.S. banks, impact loan prices negatively.

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