Speed of Issuance, Lender Specialization, and the Rise of the 144A Debt Market


  • We thank the editor (Bill Christie), Doug Emery, Jacqueline Garner, Jean Helwege, Jay Ritter, Lei Zhou, an anonymous referee, participants at the Finance Conference in Honor of Stephen D. Smith at the Federal Reserve Bank of Atlanta and the Financial Management Association 2007 Conference for useful comments, Michael Roberts for providing DealScan-Compustat link information, Vandee Marquez at Sagient Research for help with the PlacementTracker database, and the Graduate College and the Coles College of Business at Kennesaw State University for financial support.


Using a large sample of convertible and straight debt issues in the public, 144A, and bank loan markets from 1991 to 2004, we find that the 144A market has risen largely at the expense of the nonshelf public market, the overwhelming majority of the 144A issues are subsequently registered, and straight debt issuers with the highest credit quality and transparency tend to use the shelf public market. Our findings suggest that firms’ preference for speed of issuance drives the growth of the 144A market, and banks and qualified institutional buyers have advantages over public lenders in handling credit risk and information asymmetry.