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Product Name
Syndicated Loan
Product Description
A syndicated loan is a loan extended to a single customer by multiple financial institutions, which are formed into a lender group, or syndicate, for that purpose. The same terms and conditions apply to all lenders in the syndication and all lenders agree to one loan agreement. A facility agent will be appointed to manage the loan on behalf of the lenders.
Product Features
? Facility size is typically in excess of USD100 million with tenors in excess of one year. Syndicated loans can be used for a variety of purposes such as Project Finance, Working Capital, Merger and Acquisition and Structured Finance. Areas such as Manufacturing, Pharmaceuticals, Automotive, Financial Services, Natural Resources and Commercial Real Estate are some of the key industries for syndicated loans;
? A syndication process for a corporate loan typically takes two to three months to complete. During the syndication process, the Arranger or Arrangers will negotiate the loan terms with the borrower with the aim of bringing a marketable syndication to syndicate banks. A Facility Agent will also be appointed to manage the day-to-day activities of the loan.
? A syndicated loan can accommodate several types such as Term Loan, Revolving Credit Facility and Standby Letter of Credit. Currencies such as GBP, USD, EUR, JPY, SGD and RMB are the most common currencies. Select local currencies are also available for specific domestic needs;
? A successful syndication process can benefit the borrower’s reputation in the market place. It can potentially enable the borrower to access a wider pool of liquidity for future financing needs.
Eligible Applicants
Corporate – investment grade, non-investment grade and unrated clients
Borrowers who typically require medium to long term financing for amounts in excess of USD 100 million. Short term facilities (one year or less) can also be arranged upon request.
Global, regional leading, Fortune 500 borrowers with a strong reputation in their respective industry, backed by a robust financial position.
Application Requirements
? The borrower/guarantor should be a private company, public company or a financial institution
? The borrower shall be externally rated by a credit rating agency or have sufficient financial strength to meet our internal credit requirements
? The borrower shall be a small, medium or large enterprise or project company with sound operational and financial strength as well as a leader in their respective industry, with growth plans for the future
? The borrower has established or intends to establish a long standing relationship with the Bank of China Group.
? In the event of joining the syndicate set up by other banks, the arranger bank shall be a policy bank, state-owned holding bank or foreign bank with sufficient credit and operational strength.
Application Procedure
1. The relationship manager discusses the financing requirements of the customer;
2. The relationship manager initiates the internal credit approval process;
3. Negotiations commence with the customer on the term sheet, documentation and financing structure;
4. Credit approval is received and Bank of China is designated the underwriter for the financing;
5. A syndication timetable and strategy is finalised alongside the invitation list of syndicate banks;
7. A loan information memorandum and invitation letter, is sent out to relevant financial institutions;
8. A credit commitment is received from participating banks and allocations are finalised among the participant banks;
9. The syndicated participant banks agree to sign the loan agreement and all other relevant documentation;
10. The facility agreement signed;
11. The facility Agent manages the facility on a day-to-day basis.
Required Documents
? Relevant information on the borrower, their shareholders and guarantors;
? Certificate of Incorporation and Articles of Association of the borrower;
? The last three years financial statements and the latest independently audited annual report and accounts for the borrower;
? Any relevant contracts associated with the loan financing;
? Other documents or information required by the bank.
Key roles in a syndicated loan
The main roles of syndicated loan mainly involve a Bookrunner, Mandate Lead Arranger, Agent Bank, Participating Bank, Coordinator, Security Agent and Documentation Agent.
1.The Bookrunnner, (sometimes referred to as Arranger), is responsible for the organisation and arrangement of the syndicated loan, is a bank or banks which undertake the preparation of syndicate and distribution on behalf of the customer. The Bookrunner usually will underwrite the syndicated loan. The bookrunner is responsible for advising the borrower as to the type of facilities it requires and then negotiating the broad terms of those facilities with the borrower. The arranger will usually be paid an arranger’s fee for undertaking these tasks.
2.The Mandate Lead Arranger typically joins the transaction at an early stage with a significant portion of the syndicated loan commitment
3. The Facility Agent plays a very important role in the facility as the independent administrator of the loan on a daily basis. It maintains contact with the borrower and represents the views of the syndicate members. It manages all drawdowns, repayments and interest rollovers and distributes those among the syndicate members. Additionally it monitors the compliance of the borrower with the conditions of the loan agreement, such as financial covenants and the issuance of financial statements.
4. Participating Banks refer to the banks who accept an invitation of the bookrunner to join the syndication and provide loans in line with their commitment allocation. Participating banks may have different commitments in a single syndicated loan facility.
5. The Coordinator refers to the bank, selected from lead banks and occasionally the borrower, to supervise the whole syndicated loan and to assist syndicate members through their internal credit approval process.
6. The Security Agent refers toa lender from the syndicate who will usually be appointed to act as a security agent to hold the security on trust for the benefit of all lenders if the syndicated loan is a secured facility,
7. The Documentation Agent is a syndicate member that handles the documents and chooses a law firm to represent the lenders. In more structured and complex loan syndications, a documentation agent will be a crucial role in the smooth running of a legally complex deal.
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