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What are upfront fees?

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Upfront fees are the one-off fees paid by borrowers to mandated lead arrangers on the total commitment amount for arranging and originating the financing, structuring the syndicate, and marketing and distributing the syndicated facilities, commonly payable upon syndication closing.  These fees compensate for loan syndication cost and syndication risk at loan initiation.

Upfront fees comprise the arrangement fee, the underwriting fee, and the closing fees:

Participants” (small banks, institutions, CDOs, hedge funds) usually do not receive any of the underwriting spread or closing fee, instead they earn only a margin over their cost of funds.

Generally, project finance deals have higher closing fees than other loan types because they require more credit analysis and involve riskier positions.

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