What Is a Loan Syndication?

Syndicated loans are also known as "syndicate loans". Led by one or more banks approved to operate the loan business, a bank group formed by the participation of multiple banks and non-bank financial institutions uses the same loan agreement to provide financing to the same borrower on agreed terms and conditions. Products and services are targeted at large and medium-sized enterprises, enterprise groups and national key construction projects with huge capital requirements. When the amount of funds sought by the borrower is too large for any single bank to withstand the credit risk of the borrower, a demand for banking groups is created. The users of the syndicated loan market are borrowers who seek large financing in the bank loan market. ^[1]

Syndicated loan

1. The loan amount is large and the term is long. Can meet the long-term, large amount of funding needs of borrowers. Generally used for new project loans in transportation, petrochemical, telecommunications, power and other industries, large equipment leasing,

The loan price consists of two parts: interest and expenses.

Borrowers can ask the bank

A syndicated loan agreement is a legal text signed between a syndicated loan member, the borrower and the guarantor in accordance with the relevant laws and regulations, and mainly agreed on the rights and obligations between the syndicated loan member and the borrower and the guarantor.

Syndicated loan agreement content

The syndicated loan agreement should include the following main terms:
(1) Basic information of the parties, including the names and domiciles of the borrower, lead bank, agency bank, other member banks, guarantor;
(2) Definition and interpretation, defining and explaining the meaning of specific terms in the agreement;
(3) Loan-related agreements, including loan amount and currency, loan term, loan interest rate, loan purpose, repayment method and source of repayment funds, loan guarantee portfolio, loan extension conditions, and advance repayment agreement, etc .;
(4) the loan amount promised by each member of the syndicate and the time of loan allocation;
(5) Prerequisites for withdrawal;
(6) Terms of fees;
(7) tax provisions;
(8) financial constraints;
(9) Non-financial commitments, including provisions on asset disposal restrictions, business changes, and information disclosure;
(10) Incidents of breach of contract and their handling;
(11) applicable laws;
(12) Other auxiliary documents.

Dominated by Renminbi, may also include U.S. dollars,

Short-term 3-5 years; medium-term 7-10 years; long-term 10-20 years.

In 2007, Rio Tinto raised $ 40 billion in syndicated loans around the world to acquire Alcal. Bank of China is the only bank in Asia (except the Bank of Japan) to join this syndicated loan as a Lead Arranger and underwriter . This is the largest syndicated loan project in the London market (the fourth largest in the world).

Indramayu Power Station, Indonesia, $ 592 million in 2008

1. Bank account managers pay attention to customers' financing needs;

2. Receive customer loan information / financing tenders;

3. Discuss with customers, draft loan terms list, financing structure;

4. The bank is formally appointed by the syndicated loan lead bank / lead underwriter;

5. The bank confirms the loan amount;

6. Determine the syndicate schedule, syndicate strategy and syndicate invitation list;

7. Prepare a memorandum of loan information, prepare an invitation letter for the group, and send invitations to relevant financial institutions

8. The participating bank promises to subscribe for the amount;

9. Confirm the final loan amount of each syndicated loan participating bank;

10. Agree on the parties to the loan agreement and guarantee agreement;

11. sign a contract;