Are you looking to fund your growth or refinance your current credit lines, but the borrowing volume exceeds the funding capacity of a single bank, which is otherwise willing? If so, you might want to consider a syndicated loan.
How does it work?
- A syndicated loan is an alternative source of finance that is available to any company or organisation, regardless of the sector or the project to be funded. Given their specific characteristics, however, syndicated loans lend themselves best to companies and institutions that:
- Are already involved with collective funding that needs to be refinanced (maturity approaching, improved market conditions, new needs, etc.);
- Are involved in bilateral credit relationships with a large number of banks;
- Wish to refinance a significant number of credit facilities;
- Find themselves in need of new capital (to fund an acquisition, for instance);
- Are active internationally.
- A syndicated loan is arranged and financed by one or several banks (the ‘syndicate’). It is provided under the terms of a collective agreement applying to all the banks in the syndicate. The agreement can relate to a group of credit facilities (revolving credit, letter of credit, term loan, etc.).
- The structuring of the loan is entrusted to one or several Bookrunner Mandate Lead Arrangers (BMLA), which set the terms of the transaction: amount and types of facility, repayment conditions, price, general and financial arrangements (early repayment clauses), collateral, etc.
- The BMLA funds part of the loan, and the balance is split between other financial institutions, according to predefined terms.
- Transparency: the collective conditions for all the participants are set out in a single agreement.
- Made to measure: the structure of the syndicated loan is tailored to your specific needs.
- Security: you limit the potential disputes arising from multiple partners and specific agreements.
- Simplified administration: a single reporting and credit management process.
- Access to a larger credit market: you spread your credit sources and get maximum benefit from competition between the banks wishing to act as BMLA.
Good to know
- It is essential to involve your relationship manager and a specialist as early as possible in the analysis of your strategic options.
- Structuring a syndicated loan is a complex process that involves a substantial number of parties and the drawing up of legal documents. The procedure as a whole takes about seven weeks from the start of the operation to the release of the capital. It is important to take the necessary time.
- The cost of the loan consists of an interest rate plus an arrangement fee.