The mandated arranger commits itself to assemble a syndicate to arrange financing on the borrower’s behalf, subject to satisfactory due diligence and documentation. The info memo is prepared and circulated by lead arrangers on the basis of information provided by the borrowers during the due diligence process.
An investigation into the borrower group’s compliance with sanctions laws is a customary and important part of a lender’s pre‑contract due diligence.
In the due diligence process, lead arrangers acquire public and private information about the borrower and the transaction on an on-going basis and choose appropriate information to share with syndicate members. Banks decide whether to join a syndication by performing their own independent due diligence and credit approval. The type of due diligence required depends on the nature and purpose of the financing, where the due diligence preformed on acquisition and project financing transactions is quite lengthy and complex.
In order to avoid liability, arrangers require participant lenders to perform their own independent due diligence and credit analysis of the transaction with the information provided. In practice, however, lenders commonly rely to some extent on the due diligence performed by arrangers in preparing the info memo and legal documents.
The agent lender will typically require representations from each co-lender that such co-lender has not relied on the financial analysis of the agent lender and that the co-lender has done its own credit analysis and made its own decision with respect to joining the syndicate group.