A syndicate is a group of lenders formed on a temporary basis to participate in a financing transaction, usually in order to underwrite the facility and share the credit and syndication risk of the syndicated financing.  A syndicate is regulated under a syndication agreement, which is separate to the facility agreement.

The arranger group is the group of commercial or investment banks that comes together in the primary syndication and commits to provide the funds required by the borrower.  The arranger group is generally actively involved in assessing the market and determining the loan terms.  The relationship between the underwriters and the borrower often ceases after the primary syndication phase if they do not retain any of the loan on their books.

Access to the know-how and deal flow of established real estate lenders is an incentive for lenders who purchase loan participations to join a syndicate group.

A loan syndicate is comprised of one or more arrangers, bookrunners, underwriters and participant lenders.  A syndicate’s composition depends on the syndication strategy, which is generally determined by the lead arranger and agreed by the borrower.  It may be either a single-stage general syndication after the initial underwriting of the mandated arranger(s), without sub-underwriting, or a two-stage syndication with the sub-underwriting of co-underwriters prior to general syndication.

The syndication agreement is the agreement established between the participants in a syndicate (i.e., lead arranger(s), bookrunner(s), sub-underwriters and participant lenders) that regulates their individual and collective rights and responsibilities.  It addresses the relationships between the syndicate participants and sets out the syndication timetable and a method of managing issues arising in the syndication process.

Related Items