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Description of Syndicated Lending

The new edition of one of Euromoney's best-selling self-study workbooks, this complete training programme clearly explains both the theory and practice of syndicated lending and, having examined the skills necessary for success, teaches you how to apply them. This new edition has been fully revised to take account of all the latest market developments. In six detailed modules it examines each step of the syndicated process and on completion of the course you should: understand the workings of both the primary and secondary markets; be able to analyze the advantages and disadvantages of syndicated loans, including their suitability for funding an acquisition; have studied the roles of various participants and know how best to structure a syndicate; have a comprehensive understanding of the legal framework including the content and structure of loan agreements; have detailed knowledge of differing loan types and their uses; understand the borrower's needs and requirements; and be able to apply what you have learnt to real-life situations. Learn at your own pace, wherever and whenever is suits you. This detailed and comprehensive workbook is your syndicated lending training solution.

Title Information

ISBN:

9781855648890

Pages:

224 pages

Format:

Paperback

Product Code:

5429

Publisher:

Euromoney Institutional Investor

Published:

24/06/1905

Edition:

2nd edition

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Contents of Syndicated Lending

MODULE ONE

I. INTRODUCTION

II. BANKING SECTOR OVERVIEWS
A. History and background to the syndicated lending markets
B. Bank sector analysis
1. Introduction to types of banks
2. Commercial banks
3. Merchant/investment banks
4. International bank branches
Exercise one

III. SYNDICATED LENDING OVERVIEW
A. What is a syndicated loan?
B. The syndicated loan market
1. Commercial and syndicated lending
2. Some characteristics required for arranging syndicated loans
3. Primary syndicated lending markets
4. Primary and secondary (asset sales) market developments
Exercise two
C. Advantages/drawbacks of syndicated loans as a financing vehicle
1. Debt versus equity
Exercise three
D. Term loans
1. Overview of term loans
2. Advantages of term loans
3. Disadvantages of term loans
4. Uses of term loans
E. Revolving credits
1. Overview of revolving credits 19
2. Characteristics of revolving credits
3. Uses of revolving credits
4. Types of revolving credits
F. International lending
1. Introduction 21
2. Sovereign lending 21
3. Private sector lending 21
G. Project finance 22
1. Characteristics 22
2. Non-recourse and limited recourse 23
3. Main reasons for project financing 23
4. Risk phases in project financing 23
H. Maturities and repayment schedules 24
Exercise four 25
I. Pricing of term loans 26
IV. The secondary markets 28
A. Secondary market overview 28
B. Asset sales 28
1. Introduction - what are asset sales? 28
2. Underlying rationale of the secondary markets 29
3. Regulatory matters 29
4. Effectiveness of these techniques 30
C. Loan transfers (LDC debt swaps) 31
1. The asset swap deal 31
2. Mechanics of an asset swap deal 31
3. Principle players in the market 32
4. Potential marketing targets 32
5. Potential marketing costs 32
D. Secondary market trading associations and the internet 32
1. Loan Syndications and Trading Association 33
2. Loan Market Association 34
3. Equavant Group 35
Exercise five 36
V. Conclusion 36
A. The future syndications markets 36
B. Availability and capacity 36
C. Structural change 36
D. Driving growth in the market 37
E. The major players 37
F. The new entrants 38
G. The secondary market 38
H. Sources of future growth 38
I. The internet 39
J. Summary 39
Answers to exercises 40
Glossary 42


MODULE TWO

I. INTRODUCTION 2
II. THE SYNDICATIONS PROCESS 2
A. Rationale for the syndicated lending market 2
B. Role of agent bank and facility agent 3
C. The syndication sales cycle and principal milestones 4
1. Pre-mandate 4
2. Post-mandate 6
3. Closing the loan syndication 7
4. Post-closing 8
Exercise one 8
D. Structuring the syndicate 9
1. Important considerations in the syndication 9
2. Formation of the syndicate 10
3. 'Best efforts' underwritten syndications 11
4. Lead manager's commitments to the borrower 12
Exercise two 12
E. The information memorandum 13
1. Characteristics of the information memorandum 13
2. Legislation relating to information memoranda 14
Exercise three 16
F. Key issues for bidding banks 16
1. Calculating and establishing fees 16
2. Negotiations between mandated banks 16
3. Yield calculations 16
G. Pricing for syndication 23
1. Introduction 23
2. How to price a syndicated deal 23
3. Conclusion 24
H. Role of participating banks 24
1. Lead bank's relationship with the participants 24
2. The players 24
3. Why participate in syndicated transactions? 25
4. How to participate 26
5. The associated risks 27
6. Recent trends 28
Exercise four 28
I. Potential uses of financing 28
1. Acquisitions versus internal growth 29
2. Acquisitions versus strategic alliance 29
3. Diversification 30
4. New markets: cross-border 30
5. Management/operating turnaround 30
Exercise five 31
Answers to exercises 32


MODULE THREE

I. SYNDICATED LOAN AGREEMENTS 3
A. Purpose of loan agreements 3
B. Loan agreement issues 3
1. Participants 3
2. Ensuring compliance with loan agreements 5
C. Structure of loan agreements 6
1. Introduction 6
2. Preamble 7
3. Definitions 7
4. Amount 7
5. Drawings 7
6. Commitment and other fees 8
7. Interest 8
8. Repayment 8
9. Prepayment and cancellation 9
10. Representations and warranties 9
11. Covenants and undertakings 10
12. Events of default 12
13. Payments 13
14. Changes in circumstances 13
15. Expenses 13
16. Governing law 13
D. Loan agreement checklist 13
II. DIRECT PARTICIPATIONS 13
A. Agent bank 13
1. Appointment and resignation 13
2. Implied fiduciary duties 15
3. Rights and powers 17
4. Exclusion clauses 18
B. Participants 20
1. Decision making 20
2. Sharing of payments 20
III. CONVENTIONAL INDIRECT PARTICIPATIONS 21
A. Novation 21
1. Transfer of obligation 21
2. Transfer instrument 21
3. The participant, the agent and the other lenders 22
4. Transfer instruments distinguished from transferable loan certificates 22
5. Other considerations 23
B. Assignments 23
1. Assignment of the debt 23
2. Assignment of the proceeds 24
3. Loan agreement restrictions 24
4. Stamp duties 24
C. Sub-loan 25
D. Guarantee 25
E. Duties and liabilities of the original lender 25
1. Information 26
2. The Financial Services Act 1986 - Investment business 26
3. Fiduciary duties 27
4. Indemnity from participant 27
F. Rights of the participant 27
1. Compensation clauses 27
2. Participants' and original lender's rights of set-off 28
3. Borrower's rights of set-off 29
G. Balance sheet considerations 30
1. Introduction 30
2. Bank of England Notice/FSA Guide 31
3. Specific conditions of the Guide 32
4. General conditions of the Guide 32
5. Conclusion 32
H. Summary of conventional indirect participations 33
1. With contractual relationship with borrower 33
2. No contractual relationship with borrower 33
IV. CREDIT DERIVATIVES AS INDIRECT PARTICIPATIONS 33
A. Credit-linked note 33
B. Credit default swap 34
C. Total return swap 35
D. Legal relationships with borrower 35
E. Documentation 36
F. Other legal issues 36
1. Insurance 36
2. Gaming or wagering 37
G. Duties and liabilities of original lender 37
1. Information 37
2. Financial Services Act 1986 37
3. Fiduciary duties 37
4. Indemnity from participant 37
H. Rights of participant 38
1. Compensation clauses 38
2. Original lender's rights of set-off 38
3. Borrower's rights of set-off 38
I. Balance sheet considerations 38
1. Bank of England/Financial Services Authority 38
2. Conclusion 40
V. SECURED LOANS 40
A. Direct participations 40
B. Indirect participations 41
C. Continuing dangers of novation 42
Exercise one 43
Answers to exercise 44


MODULE FOUR

I. FACILITY STRUCTURE AND ANALYSIS 3
A. Syndicated loans - characteristics, types and uses 3
1. What is a syndicated loan? 3
2. Why use a syndicated loan? 3
3. Main features of syndicated loans 4
4. Types of syndicated loans 4
5. Syndicated loan maturity schedules 4
6. Pricing considerations 5
7. Loan agreement covenants 6
8. Syndicated loan structure - capital adequacy considerations 7
Exercise one 7
B. Credit analysis and information memoranda 8
1. Introduction to information memoranda 8
2. Contents of information memoranda 9
3. Primary characteristics of information memoranda 10
Exercise two 11
C. Traditional financing 11
1. Standby facilities (temporary/seasonal finance) 11
2. Working capital lending 13
3. Cash flow lending 13
4. Revolving credits 14
Exercise three 15
D. Acquisition financing 15
1. Leveraged buyout/management buyout 15
2. Understanding the players - buyers, sellers and advisers 16
3. Corporate valuation 17
4. Credit analysis 18
5. The management team 18
6. Cash flow 18
7. Collateral 19
8. Capital 20
9. Industry conditions 20
10. Structure of the loan 21
11. Summary 21
Exercise four 21
E. Project financing 22
1. What is project financing? 22
2. What advantages can project financing offer? 23
3. What are the applications of project financing? 23
4. What are the roles in project financing? 24
5. Project finance documentation issues 24
6. Project finance syndicated lending market 24
7. Project finance syndication strategy 25
Exercise five 26
F. Debt refinancing 26
G. Long-term credits - disbursement 27
1. Straight and standby term loans 27
2. Pricing 27
3. Documentation 28
II. Problem loan management 28
A. Introduction 28
B. Early warning signs 29
C. Fact finding and damage control 30
D. Continuation of the business 31
E. Summary 32
Exercise six 32
Answers to exercises 34


MODULE FIVE

I. THE BORROWER'S VIEWPOINT 2
A. Introduction 2,
1. What is the syndicated loan borrower looking for? 2
2. What are the banks looking for? 2
3. Negotiating fees 3
4. Covenants and warranties 4
5. Conditions precedent 4
6. Documentation 5
Exercise one 6
B. Optimal capital structure 7
1. Different types of financing 7
2. The advantages of leverage 8
3. The disadvantages of leverage 8
4. Conclusion 9
Exercise two 9
C. Overview of corporate debt 9
1. The trade-off theory 9
2. Pecking order theory 10
3. Debt versus equity 12
4. Advantages of syndicated loans 13
Exercise three 14
D. The information memorandum 14
1. Background 15
2. Contents 15
3. Characteristics 16
4. The borrower's viewpoint 16
Exercise four 17
E. Assembling the borrower's debt raising team 17
1. The sponsors 17
2. The corporate financial adviser 18
3. The banks 18
4. The lead manager (or arranging bank) 19
5. The facility agent 20
6. Technical consultants 20
7. Lawyers and accountants 20
8. Governments 21
9. Governments in exporting countries 21
10. Multinational agencies 21
11. Conclusion 22
Exercise five 22
F. Credit rating agencies 22
1. The purpose of credit ratings 22
2. Corporate rating methodology 23
3. A generic checklist of ratings criteria for corporate borrowers 24
4. Example of rating scales (Standard & Poor's) 27
Exercise six 29
Answers to exercises 30


MODULE SIX

I. SYNDICATED LENDING CASE STUDIES 2
A. The role of the agent bank 2
1. Introduction to the case study 2
2. Introduction 2
3. The loan syndication 3
4. Relationship of syndicate members 3
5. Conclusion 4
Exercise one 5
B. The rise in big ticket lending 5
1. Introduction to the case study 5
2. Syndicated loans - July 1999 6
3. Consolidation effects 6
4. 'Market flex' 7
5. Pricing considerations 8
6. Euro-M&As fuel syndicated loans growth 8
Exercise two 9
C. Growth in the secondary loan market 10
1. Introduction to the case study 10
2. Secondary loan market takes off 10
Exercise three 11
D. Eurotunnel project financing 11
1. Introduction to the case study 11
2. Promoters and founder shareholders 11
3. History of the Eurotunnel syndicated loan 11
4. Key milestones in the financing process 11
5. Equity structure 14
6. Eurotunnel debt structure 14
7. Credit agreement operation 14
8. Credit agreement costs 15
9. Credit agreement terms and repayments 15
10. Credit agreement controls and reporting 15
11. Credit agreement security 16
Exercise four 16
E. Energy project finance in Turkey 16
1. Introduction to the case study 16
2. The future of energy 17
Exercise five 18
F. Various caselets 18
1. Vodafone in record US$128.5 billion hostile bid for Mannesmann 18
2. Olivetti - Telecom Italia 19
3. Airbus A380 - the world's largest commercial jet 20
4. BP Amoco case 20
Exercise six 21
Answers to exercises 22