Private debt versus bank debt in corporate borrowing

Using administrative bank loan-level data matched to private debt deals, we study the interaction between private and bank debt for a large segment of dual borrowers. These firms use private debt for investment and bank credit lines for liquidity insurance. Private debt carries higher spreads and commonly features flexible, equity-like terms that are associated with greater reliance on bank credit lines. Relative to bank-only borrowers, dual borrowers obtain more and larger credit lines and draw them more intensively following liquidity shocks. Our findings suggest that private debt substitutes for bank term loans but complements banks’ provision of liquidity through credit lines.