This paper explores how asymmetric information about borrower quality
among syndicated lenders alters the incentive to refinance illiquid bo
rrowers. We use a model in which lenders enter the market sequentially
in two rounds of lending. Between the two rounds, a shock separates b
orrowers into good ones and bad ones, and early entrants acquire infor
mation about individual borrower type, while late entrants know only t
he distribution of borrower types. The asymmetric information structur
e gives rise to both signalling and screening issues. We show that sel
f-selecting contracts do not exist, and that there is always a pooling
Perfect Bayesian Equilibrium in which late entrants lend to both good
and bad types, without borrower type being exposed before final clear
ing at the terminal time. Based on this framework, we argue that prior
to the 1982 international debt crisis, it was possible for banks with
heavy exposure to troubled debtors to attract rational newcomers in s
yndicated loans which were, with positive probability, bailout loans.