Syndicated Loan

Introduction

Syndicated loan refers to financing method where two or more lenders provide funds for one or more companies with one loan agreement based on agreed term and conditions. The product mainly serves large group customers and large construction projects. With syndicated loan, the borrower can obtain large amount of long-term financing under uniform loan conditions. During the raising of syndicated loan, the borrower can boost its market influence and improve market image.

Features

  1. Large amount and long term. It can meet borrowers' demand for funds of long term and large amount.
  2. Less time and effort for financing. It is usually the responsibility of the arranger for doing the preparation work of establishing the syndicate after the borrower and the arranger has agreed on loan terms by negotiation. During implementation of the loans, the borrower does not need to face all members of the syndicate, and relevant withdrawal, repayment of principal with interest and other management work related to the loans shall be fulfilled by the agency bank.
  3. Diversified approaches for syndicated loans. The same loan syndications can include many forms of loans, such as fixed-term loans, revolving loans, standby L/C line on requirements of the borrower. Meanwhile, the borrower can also choose USD, HKD, CNY and other currencies or currency portfolio, if needed.
  4. It can help the borrowers establish a good image in the market. Successful establishment of the syndicate comes from the participants' full recognition of the borrower's financial and operational performance, by which the borrower can build up their reputation.
  5. Bank of China Hong Kong Syndicated Loan Center can offer help with its advantages.

Currency

Syndicated loan mainly adopts USD, HKD and other currencies are also available. Multiple currencies can be used in a single syndicated loan on demand of the borrower.

Interest Rate

- The price of syndicated loan is composed of loan interest and fees.
- Lending interest rate shall be set, for different borrowers, in line with the provisions of the syndicated loan contracts.

Charges

Charges mainly include arrangement fee, underwriting fee, agency fee, commitment fee.

Target Customers

  1. Borrowers who require long-term and large-amount loan.
  2. Borrowers with high reputation in the industry, whose operation ability as well as financial and technical strength are recognized by most banks.

Application Qualifications

  1. The borrower should be an enterprise or other economic organization approved and registered legally.
  2. The borrower shall meet requirements of certain level after credit rating by Bank of China or other recognized rating agency.
  3. The borrower shall be large and medium manufacturing enterprises or project companies with sound operation and finance as well as strong competition in respective industries, which shall be promising in the development.
  4. For participation in the syndicate built by other bank, the arranger bank shall be a bank with sufficient credit and operational strength.

Required Documents

  1. Relevant information of the borrower and their shareholders and guarantors.
  2. Business license and articles of association and so on of the borrower.
  3. Borrower's audited financial statements of the latest tree years and latest financial statement.
  4. In case of specific project, purchase contracts, construction contracts, supply and sale contracts of project equipments are required.
  5. Other documents or information needed by the bank.

Procedure

  1. Receive loan information/financing tender documents of customers.
  2. Negotiate with customers to draft of the list of loan terms and financing structure.
  3. Bank of China is officially appointed by the lead bank and the principal underwriting bank of  syndicated loans.
  4. Confirmation of the loan amount by Bank of China.
  5. Determination of preparation schedule, organizing strategy and invitation list of syndicates.
  6. Prepare loan information memorandum and letter of syndicate invitation, and send out the invitation to relevant financial institutions.
  7. Subscription amount undertaken by participants.
  8. Confirmation of the final loan limit of each loan syndication participant.
  9. Parties agree to sign the loan agreement and guarantee agreement.
  10. Sign agreements.
  11. Work of the agency bank.

Tips

Business of syndicated loan mainly involves arranger, lead bank, manager, participant, agency bank, coordinator and other members, who will perform the duty, enjoy the right and assume the risk according to the contract or their respective lending proportion.
Syndicate member banks are divided into three main levels: first, arranger (lead bank); second, manager; third, participants.

  1. The arranger, responsible for organization and arrangement of the syndicated loan, is a bank or banks which undertake preparation of syndicate and distribution on commission of customers. The arranger usually will underwrite the whole issue of syndicated loan.
  2. The lead bank underwrites a larger share of the syndicated loan, ranking the highest among managers. Usually, the lead bank is also the arranger.
  3. The manager refers to the position granted by the lead bank according to loan amount and level undertaken by each bank in the syndicated loan with larger amount and more participants. It's a bank responsible for establishing syndicate during the preparation stage. The managers, forming manager board of the syndicate, are mainly responsible for organizing the examination of loan projects and feasibility of syndicate establishment, discussing loan documents with the lead bank and finally signing the loan contract.
  4. Participants refer to the banks who accept invitation of the arranger to join the loan syndicate and provide loans according to shares determined through negotiation. Differences with the managers: Less loan subscription, assume no responsibility for undertaking and other practical preparation of the syndicate.
  5. The agency bank is selected by syndicate members and approved by the borrower during the loan period. After signing the loan agreement, the agency bank, on behalf of syndicate members, is responsible for withdrawal, repayment of principal with interest, post-loan management and other issues on loan management as well as communication between syndicate members and the borrower, handling contract breach, etc. in the light of terms of the loan agreement.
  6. The coordinator refers to the bank, selected from lead banks, to supervise the whole syndicated loan and to partially undertaken preparation tasks of the bank syndicate.
  7. Consultant refers to the bank appointed by the borrower during the syndicated loan period, which provides paid financial advisory service for the borrower to make correct loan decision in face of various quotations and loan terms provided by other banks so as to facilitate all the loan work.