Carey and Nini (2007) provide evidence that interest rate spreads on syndicated loans differed systematically between the European and the US market during the 1992 to 2002 period. Loan spreads in Europe are, on average, about 30 basis points smaller than in the US. We show that accounting for unused fees (AISU) fully explains the pricing puzzle for lines of credit. While European borrowers pay a significantly lower AISD, they also pay a significantly higher AISU. For term loans, we document a

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... ystematic selection effect: Firms with high borrowing costs in the market for lines of credit ─ as measured via the AISD and AISU ─ are more likely to also be active in the term loan market. This selection effect is significantly smaller in Europe and explains 50-90% of the pricing difference between US and European term loans. These results are consistent with commitments being exclusively provided by banks, while term funding is subject to a selection effect depending on the availability of outside options for borrowing via bond markets.