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    Loan Syndication Ti On

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    hayden28
    A loan syndication involves a group of banks providing a single loan to a corporate borrower. The lead bank is selected to arrange the loan and place it with other participating banks. Term loans are typically syndicated. A merchant banker may help arrange the syndication. The lead manager is responsible for placement and ensures full subscription, earning an arrangement fee but also facing reputational risk. Participating banks earn interest and fees but face borrower and compliance risks. An underwriting bank commits funds if needed. A facility manager handles administration over the loan term. Syndicated loans are used for working capital, exports, acquisitions, and more. Benefits include lower costs for borrowers, while disadvantages include complexity of negotiations. Consortium finance

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    Loan Syndication Ti On

    Uploaded by

    hayden28
    28 views11 pages
    A loan syndication involves a group of banks providing a single loan to a corporate borrower. The lead bank is selected to arrange the loan and place it with other participating banks. Term loans are typically syndicated. A merchant banker may help arrange the syndication. The lead manager is responsible for placement and ensures full subscription, earning an arrangement fee but also facing reputational risk. Participating banks earn interest and fees but face borrower and compliance risks. An underwriting bank commits funds if needed. A facility manager handles administration over the loan term. Syndicated loans are used for working capital, exports, acquisitions, and more. Benefits include lower costs for borrowers, while disadvantages include complexity of negotiations. Consortium finance

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    A loan syndication involves a group of banks providing a single loan to a corporate borrower. The lead bank is selected to arrange the loan and place it with other participating banks. Term loans are typically syndicated. A merchant banker may help arrange the syndication. The lead manager is responsible for placement and ensures full subscription, earning an arrangement fee but also facing reputational risk. Participating banks earn interest and fees but face borrower and compliance risks. An underwriting bank commits funds if needed. A facility manager handles administration over the loan term. Syndicated loans are used for working capital, exports, acquisitions, and more. Benefits include lower costs for borrowers, while disadvantages include complexity of negotiations. Consortium finance

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    28 views11 pages

    Loan Syndication Ti On

    Uploaded by

    hayden28
    A loan syndication involves a group of banks providing a single loan to a corporate borrower. The lead bank is selected to arrange the loan and place it with other participating banks. Term loans are typically syndicated. A merchant banker may help arrange the syndication. The lead manager is responsible for placement and ensures full subscription, earning an arrangement fee but also facing reputational risk. Participating banks earn interest and fees but face borrower and compliance risks. An underwriting bank commits funds if needed. A facility manager handles administration over the loan term. Syndicated loans are used for working capital, exports, acquisitions, and more. Benefits include lower costs for borrowers, while disadvantages include complexity of negotiations. Consortium finance

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 11

    LOAN SYNDICATION AND CONSORTIUM FINANCE

    LOAN SYNDICATION
    It is a loan extended by a group of banks to a corporate
    borrower.
    It is a single loan arrangement.
    Lead bank will be selected by the group of banks.
    Usually term loans are provided.
    Firm may avail the service of a merchant banker to
    arrange for loan syndication.
    Important Roles in Syndicated Loans
    Lead Manager:
    The lead manager is a bank that is awarded the
    mandate by the prospective borrower and is
    responsible for placing the syndicated loan with the
    other banks and ensures that the syndication is fully
    subscribed. They are entitled to the arrangement
    fee and undergo a reputation risk during this process.
    Participating Bank:

    This bank participates in the syndication by lending a


    portion of the total amount required. It is entitled to
    receive the interest and the participation fee. But it,
    however, faces risks such as: -
    * Borrower credit risk
    * Passive approval and complacency
    Underwriting Bank
    It is the bank that commits to supplying the funds to
    the borrower - if necessary from its own resources if
    the loan is not fully subscribed. The lead manager or
    another bank may play this role. Not all syndications
    are underwritten. The risk is that the loan may not be
    fully subscribed.
    Facility Manager / Agent
    This bank takes care of all the administrative
    arrangements over the term of loan,
    e.g.,disbursements, repayments, compliance.
    This bank acts on behalf of all the banks participating.
    This may be either the lead manger or the
    underwriting bank.
    Syndicated loans used for……
     Working capital credit (refinancing of small lines of
    credit, etc.);
     Export finance (including ECAs);
     Capital goods financing (machinery, etc.);
     Mergers & Acquisitions;
     Project finance (SPVs, structured according to cash flow);
     Stand-by facilities;
    Trade finance (Letters of credit, promissory notes,
    forfeiting);
    Guarantees (supply, service, etc.)
    Advantages
     Allows the borrower to access from a diverse group of
    financial institutions.
     Borrowers can raise funds more cheaply in the
    syndicated loan market than by borrowing the same
    amount of money through a series of bilateral loans.
    This cost saving increases as the amount required
    rises.
    Disadvantages
     Each bank needs to come to an understanding of the
    business and how its financial activities are conducted.
     A comfort level must be established on both sides of the
    transaction, which requires time and effort.
     Negotiating a document with one bank can take days. To
    negotiate documents with four to five banks separately is a
    time-consuming, inefficient task.
     Staggered maturities must be monitored and orchestrated.
     Multiple lines require an inter-creditor agreement among
    the banks, which takes additional time to negotiate.
    CONSORTIUM FINANCE
    Under consortium financing, several banks (or
    financial institutions) finance a single borrower with
    common appraisal, common documentation, joint
    supervision and follow-up exercises, these banks have
    a common agreement between them, the process is
    somewhat similar to loan syndication.

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