After the mandate is awarded, borrowers commonly require a commitment letter. The mandated lead arranger (MLA) acknowledges in a commitment letter (letter of intent) to assemble a syndicate and arrange the financing on the borrower’s behalf, the amount and terms of the financing, and the arranger’s duties and compensation (fees). It is generally provided to start the syndication process.
The actual syndication process starts with a meeting between the borrower and the MLA at which they discuss the syndicate strategy in detail, set the syndicate timetable and negotiate and sign the commitment letter. The commitment letter is based on a general understanding of the intent of the borrower and the MLA to negotiate in order to enter into the financing transaction. The MLA then engages legal counsel to prepare the initial set of loan documentation. Depending on the syndication strategy, potential co-underwriters may also participate in this meeting.
Having won the sole mandate, Chase met with Disney to negotiate a commitment letter with final terms, discuss the syndication strategy, and map out a syndication timetable.
Under a clear market provision found in the mandate letter or commitment letter, the borrower undertakes that neither the borrower nor any borrower group company shall engage in any attempt to raise any other financing in the domestic or international markets prior to successful completion of syndication except with the prior consent of the mandated lead arrangers, the bookrunners and the underwriters. The purpose of this provision is to protect participant lenders from having to compete with the borrower for the funds of the same investors.
Of the 208 syndicated loans it arranged in [the Asian-Pacific region from 1996 to 2000], 141 (almost 70%) were underwritten with only the standard material adverse change and clear-market conditions.