To establish a syndicate, one or more arrangers are mandated by a borrower to arrange the financing and organize and lead the syndicate. The financing syndication starts with its structuring and ends upon its successful distribution to the participant lenders.
Finance structuring is the designing of a financing by the lead arranger with the borrower, commonly together with other members of the syndicate group, and the setting of the tiers according to commitment amounts. Distribution involves identifying the banks and investors to invite to sub-underwrite the total commitments in primary syndication and/or lenders in general syndication and the marketing of the financing to those prospective syndicate participants.
"Commitment" means: (a) in relation to an Original Lender, the amount set opposite its name under the heading "Commitment" in Part II or Part III of Schedule 1 (The Original Parties and Properties) and the amount of any other Commitment transferred to it under this Agreement; and [...]
Lead arrangers originate and usually underwrite the financing and arrange the syndicate. For a firm-commitment underwriting, lead arrangers typically provide the borrower some form of confirmation (commitment letter or letter of intent) in which they commit to underwrite the total amount of the required financing – their commitment – after obtaining the lead arranger mandate from the borrower.
The actual syndication process starts when invitation letters are sent to prospective sub-underwriters and participant lenders. Lead arrangers typically invite both borrower relationship banks as well as banks with a reciprocal syndication relationship with the lead arranger.
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Depending on the syndication strategy, lead arrangers identify and decide which banks to invite to participate in the syndicate, the tiers according to the level of commitment (“ticket”), decide on titles for the participants, set fees for each tier, and determine each underwriter’s final hold.
The financing must be structured to reflect the terms and conditions that are acceptable and marketable to the prospective co-underwriters and lenders. MLAs typically discuss and agree the final structuring of the financing and the syndication strategy with the management group.