The initial underwriting of the financing by the mandated lead arrangers triggers the start of primary syndication.  After this, and depending on the syndication strategy, it proceeds into either a single-stage general syndication or a two-stage syndication with sub-underwriting prior to general syndication.

In two-stage primary syndication, the commitment of lead arrangers is first marketed to and distributed among the sub-underwriters.  Each sub-underwriter commits to a certain portion of the financing commitment, which obligates the co-underwriter to fund that part of the total financing.  Sub-underwriting is the wholesale phase of syndication.

Following the sub-underwriting of the financing, it is then marketed to lenders in general syndication.  General syndication is its retail phase of primary syndication, when underwriters solicit the interest of lenders to invest in and fund part of the total commitments of the underwriters.  Arrangers commonly choose participant lenders with similar lending specialization and capability to monitor the borrower.

The original lenders participate in syndicated lending when they subscribe for any of the total commitments of the co-underwriters.  The signing of the facility agreement by the original lenders typically marks conclusion of primary syndication.

[Each] Original Lender [...] becomes a Lender as part of the primary syndication of the Facilities”.

Although syndication strategy is the responsibility of the lead arrangers, they will generally accommodate the wishes of the borrower to invite certain other banks to participate as co-underwriters and participant lenders.

Lead arrangers are commonly the borrower’s main relationship bank, which gives them an information advantage over other syndicate participants.  Such relationship lending has a significant impact on the loan terms.  It also creates potential moral hazard for the lead arrangers towards the other syndicate participants.

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