The lead arranger performs the key functions of:
- Origination – The process by which a lender originates, develops and closes financing transactions, it beginning with borrower acquisition and ends when the facility documents are signed;
- Structuring – Designing and negotiating the financing arrangement with the borrower and setting tiers according to commitment amounts; and
- Distribution – Identifying which banks to invite to participate and the marketing to those banks.
Bookrunning, which is an element of distribution, is very visible vis-à-vis the borrower and the general market and is generally considered the most desirable syndication task. Bookrunning involves the central responsibilities of issuing invitations to prospective lenders, communicating information to the banks, informing the borrower and the management group of daily progress, coordinating the borrower’s follow-ups with the interested banks, managing prospective lenders through the credit approval process, pricing the loan, setting the closing fees, offering brackets, and making the final allocations to the participant lenders.
The market assigns the most importance to the Lead Arranger and Bookrunner titles. Usually the lead arranger also takes the bookrunner title[...].
Joint bookrunning is when bookrunning is performed by a joint lead arranger, commonly for a different market. This necessitates that the syndication efforts be coordinated and that no prospective lender should be approached by more than one bookrunner.
Lead arranges can assume various other roles in a syndicate. In addition to acting as sub-underwriter in the primary syndication phase, lead arrangers usually participate as lenders in the general syndication phase by the amount of their final hold.