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Loan Syndication

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What is the borrower-arranger relationship?

Relationship lending is an on-going bank-borrower relationship that is established with a view to provide continuing banking services to the borrower.  Market-based transaction len…


What is the arranger-borrower relationship?

Relationship lending establishes long-term contracts between borrowers and lenders with a view to provide banking services that are considered part of a continuing bank-customer re…


What is syndication strategy?

Banks compete for lead arranger mandates on pricing and syndication strategy.  The syndication strategy determines the type of syndicate (firm-commitment, best-efforts or club deal…


What is syndication closing?

The date a financing agreement is executed is the signing date, as of when the parties to the agreement are bound by its terms and conditions and the agreement becomes effective (e…


What is syndicated lending?

Syndicated lending is multilateral lending that is originated, arranged and structured by one or more banks (lead arrangers) and marketed and distributed on a borrower’s behalf to…


What is successful syndication?

A successful syndication is achieved when the participation of each of the underwriters in the syndication of financing facilities is reduced to the final hold specified in the man…


What is subordinated debt?

Subordinated debt is all debt that ranks after asset-based financing, senior secured term loans and unsubordinated debt but ahead of equity investments.  Whereas in Europe subordin…


What is structural subordination?

Structural subordination is subordination by virtue of the company group structure, where indebtedness incurred at the parent or holding levels in a corporate group is subordinated…


What is senior debt?

Senior debt is debt that is unsubordinated to other debt of the borrower.  It ranks ahead of other secured debt, unsecured debt and subordinated debt with regard to claim on the bo…


What is revolving credit?

A revolving credit (RC) is financing made available to a borrower by bank lenders up to a maximum amount that may be drawn down, repaid and re-drawn up to the preset limit over a f…


What is primary syndication?

Initial underwriting is when a financing transaction is underwritten by mandated lead arrangers, which triggers the start of syndication.  After this, and depending on the syndicat…


What is participation syndication?

A US transacted participation is a financing arrangement that involves the true sale of an undivided interest in a loan and commitment by the lender of record (grantor) to particip…


What is mezzanine debt?

Mezzanine debt is a private term loan with a bullet maturity whose claim to interest and principal payments ranks after senior secured debt but ahead of equity, commonly raised wit…


What is market flex?

Mandate letters for fully underwritten deals generally contain a market flex.  A market flex sets out the circumstances in which syndicate arrangers are entitled to unilaterally ad…


What is margin?

Margin is the difference (“spread”) between the total interest rate charged on a loan and its reference base rate (e.g., LIBOR).  It reflects the borrower’s credit quality and, thu…


What is loss given default?

The recovery rate (RR) is the percentage of a defaulted financing that a creditor receives in final settlement of its claims on its defaulted claims (lease, loan), it comprising th…


What is loan underwriting?

Loan underwriting is the process by which a potential lender originates a loan and assesses the creditworthiness a prospective borrower, from credit application or request for fina…


What is loan underpricing?

Underpricing is the setting of a loan’s offer price to lenders/investors in primary syndication lower than the loan’s break price in the secondary market – analogous to bond origin…


What is loan syndication?

Syndication is the arranging, structuring, marketing and distribution of multilateral financing on a borrower’s behalf to a group (syndicate) of underwriters and/or lenders by obta…


What is loan syndication?

Syndication is the arranging, structuring, marketing and distribution of multilateral financing on a borrower’s behalf to a group (syndicate) of underwriters and/or lenders by obta…


What is loan subscription?

An invitation to participate is a solicitation sent by arrangers to short-listed participant lenders in general syndication describing the basic terms and conditions of the financi…


What is loan sales?

Unlike best-effort arrangements or club deals, arrangers must transfer all or part of their interest in the financing for the underwritten facilities to be syndicated to new lender…


What is loan pricing?

Loan pricing is the process of determining the interest rate for granting a loan, typically as an interest spread (margin) over the base rate, conducted by the bookrunners.  The pr…


What is loan novation?

Novation as used under English law is the transfer of the rights and obligations of a financing agreement in which the lenders’ commitment to advance funds still exists by discharg…


What is leveraged acquisition finance?

Leveraged finance is funding provided to a borrower that has a non-investment (speculative) grade rating, generally in the form of structured finance arranged in several facilities…


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