The determinants of multiple bank loan renegotiations in Europe

What is it about?

Multiple renegotiations concern large loans funded by numerous lenders. Borrower opacity and amendments' characteristics reduce the renegotiations. Credit crisis of 2008 increases the number of renegotiations. Financial development and legal environment influence the renegotiation process.

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Why is it important?

Multiple renegotiations occur for more than a third of borrowers, while the average number of renegotiation rounds equals 1.67. The most often amended loan term is the facility amount, which occurs in 40% of renegotiations. Maturity and covenants are amended in 26% and 12% of cases, respectively. Bank loan renegotiations in Europe differ fromthose in the US in terms of frequency, amended terms, and first occurrence. More precisely,multiple renegotiations are less frequent, covenants are less frequently amended, and the first renegotiation occurs much later. Furthermore, the maximum of jointly renegotiated loan characteristics equals to two, themost frequent being the amendments to the facility amount and maturity. Renegotiating both the amount and the definition increases with the renegotiation round. Nevertheless, loan characteristics are rarely renegotiated jointly.