Loan_syndication

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PRESENTATION ON LOAN SYNDICATION:

PRESENTATION ON LOAN SYNDICATION PRESENTED By :- Akshay Khade ( A- ) Preetee Likhamani ( A- ) Rishikesh Pawar ( c-32) Nitin Pathade ( c-35)

MEANING OF SYNDICATE LOAN :

MEANING OF SYNDICATE LOAN A loan offered by group of lenders who work together to provide funds for a single borrower Borrower could be corporation, a large project, or a sovereignty A syndicated loan is one that is provided by group of lenders and is structured, arranged and administered by one or several commercial banks or investment banks known as arrangers

NEED FOR SYNDICATE LOAN:

NEED FOR SYNDICATE LOAN Corporate purposes including capital expenditure, working capital and expansion Refinance the existing capital structure and recapitalization Providing funds for mergers and acquisitions

DIFFERENCE BETWEEN LOAN & SYNDICATE LOAN:

DIFFERENCE BETWEEN LOAN & SYNDICATE LOAN A loan borrower directly apply for a loan to individual bank but in syndicate loan borrower apply for loan to lend bank and lead bank arrange funds from different banks and from investor Loans are applied for small fund and syndicate loans are applied for huge funds Syndicate loan minimizes the bank loan but in loan risk is high In syndicate loan fees are charged for risk and complexities as not in case of simple loan.

SYNDICATE LOAN MARKET PATICIPANTS:

SYNDICATE LOAN MARKET PATICIPANTS There are three primary-investor constituencies 1. Banks 2. Finance Companies 3. Institutional Investors

TYPE OF SYNDICATION:

TYPE OF SYNDICATION There are three types of syndication which are as follows Underwritten deal Best effort syndication Club deal

UNDERWRITTEN DEAL:

UNDERWRITTEN DEAL An underwritten deal is one for which the arrangers guarantee the entire commitment then syndicate the loan. If the arranger can not fully subscribe the loan, they are forced to absorb the difference, which they may letter to sell to investor. Arrangers maintain capital adequacy ratio to meet the fluctuation

REASON FOR UNDERWRITTING LOANS:

REASON FOR UNDERWRITTING LOANS Offering an underwritten loans can be competitive tool to win mandates Underwritten loans usually require more lucrative fees because the agent is on the hook if potential lenders balk.

BEST EFFORTS SYNDICATION:

BEST EFFORTS SYNDICATION A best effort syndication is one for which the arranger group commits verbally to underwrite less than the entire amount of the loan, leaving the credit to the change of the market The best effort syndication were used for risky borrowers or for complex transaction.

CLUB DEAL:

CLUB DEAL A private equity buyout or the assumption of a controlling interest in a company that involves several different private equity firms. This group of firms pools its assets together and makes the acquisition collectively. The practice has historically allowed private equity to purchase much more expensive companies together than they could alone. Also , with each company taking a smaller position, risk can be reduced. A club deal is smaller loan usually $25 -100 million but as high as $150 million.

SYNDICATION PROCESS:

SYNDICATION PROCESS 1. T he syndication process starts from BANK BOOK. Bank book include an executive summary, investment consideration, list of terms and condition, and industry overview, and an financial model. The agent will set price or price range that will be offered to investor. 2. Once this intelligence has been gathered, the agent will formally market the deal to potential investor.

Continued..:

Continued.. 3. Once total fund to be collected is known from potential investor than market rates are decided on the basis of risk involved and complexities. All the details regarding to bank and document required to the bank from company is given to company. 4. Loan is provided to the company.

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