Arranging the Process of Raising Syndicated Loans

Abstract

The article presents the main aspects of organisation, formation and management of a syndicate of banks in the syndicated lending market. A syndicated loan is provided to a borrower by two or more creditor banks on equal terms within one loan documentation package. This market has the following main characteristics: significant amounts of financing; transactions are organised and syndicated by the largest investment and commercial banks; standard legal documentation; centralisation of agency function. The syndication process is a key factor in a successful transaction in the syndicated lending market. The research objective is a structured description of the syndication business process in the credit market. The following tasks have been set and solved: 1) determining the optimal syndication schedule; 2) transactional and legal documents classification; 3) development of methods of risk management of the syndication process. The methodological basis is the process approach to the formation of a syndicate and the role distribution among the bank transaction participants (organisers, underwriters, bookrunners, agents). Based on the regulatory specifics of syndicated lending, legal documents of the process (mandate letter, confidentiality agreement, syndication letters) have been described. The optimal schedule has been proposed to implement a syndicated loan transaction. It includes five stages: 1) planning; 2) formation of a “senior” syndicate; 3) formation of a “common” syndicate; 4) management of the final structure of the syndicate; 5) legal closing of the transaction. Marketing materials (investment presentation, information memorandum) and key transaction activities (press releases publication and bank meeting) have been examined. Key risks of syndicated lending have been defined and described; they include market risk underwriting and funding. From a practical point of view, the article is of interest for representatives of the Russian commercial and investment banks and corporate borrowers who plan to attract corporate financing in the international syndicated lending market.