A syndicated loan is a collection of individual loans to creditors (or members of a syndicate) to a single borrower, the terms of each contract entered into between the borrower and the creditor states that the maturity of the borrower’s obligations to creditors and the interest rate is the same for all contracts. Each lender must provide the funds to the borrower in the amount and under the conditions provided separate bilateral agreement.
Each individual creditor has the right to claim from the borrower in accordance with the terms of the bilateral agreement. Therefore, the requirements for the borrower to repay the monies received are individual in nature and belong to each individual lender and on the terms of the signed agreements.
The calculations for the grant and loan repayment shall be made through a credit institution that can simultaneously be a creditor (syndicate members) while performing agency functions (agent bank).
Agent bank acting on behalf of the creditors on the basis of a multilateral agreement with the creditors, which contains the general terms of the syndicated loan to the borrower (the total amount of the loan and the interest of each bank, the interest rate, term of the loan) and also defines the relationship between lenders and agent bank.
Individually initiated syndicated loan is a loan provided by the bank (original creditor) on its own behalf and at its own expense to the borrower, claims (some of them) in which the original creditor subsequently ceded to third parties (banks – members of the syndicate) if the certain conditions are met.
The share of each bank – the syndicate members in total they buy the rights to the requirements of the borrower is determined by agreements between banks. Members of the syndicate and the original creditor and is fixed in each individual contract of assignment of claims, concluded between the original creditor and the bank – member of the syndicate.
The main features
Volume. As a result, the borrower of cash loans for cars in Sydney gets the required amounts, which banks usually do not give a loan to one borrower at a time. Conditions. All the conditions of the loan, including the rights and obligations of lenders and borrowers are set out in a single multi-page document signed by all parties.
Term. Typically, the terms of syndicated loans ranged from 6 months to 3 years, sometimes reaching 10 – 15 years (for project financing). The preparation time. As a rule, the term transaction structuring and documentation of 1.5 – 2 months for the market, and about 3 months for new participants.
Special conditions. Syndicated loans, as opposed to standard bank loans, suggest the existence of specific financial and other covenants (commitments), the violation of which may result in a requirement of creditors on early repayment of the loan.