A syndicated loan is offered by a group of lenders (called a syndicate) who work together to provide funds for a single borrower.
Each lender is expected to provide a defined percentage of the loan and receives the same percentage of repayments in addition to interest payments. Typically there is a lead bank or underwriter of the loan, known as the ‘arranger’, whose responsibility it is to structure the loan transaction. This lender may put up a proportionally bigger share of the loan, or perform duties like dispersing cash flows amongst the other syndicate members and administrative tasks. The parties to a syndicated loan transaction usually include:
- Arranger/Lead Bank – responsible for structuring the loan
- Underwriting Bank (optional) – guarantees that the entire loan amount would be made available to the Borrower
- Participating Banks/Lenders – lend a fraction of the total amount required
- Facility Agent – responsible for the administration of the loan e.g. disbursements, repayments etc
- Borrower – seeks the loan and is responsible for repayment of principal and interests
- Security Trustee responsible for holding the security for the loan on behalf of the lenders