CheatSheetsHero

govardhanam-deepika / Syndicate loans

May 28, 2025 22:13
agent bank
credit facilities
loan syndication
loan trading
syndicated loans
Download PDF
Missing something?

Syndicate loans

This cheat sheet provides a detailed overview of syndicated loans, including their structure, key players, facility types, and trading aspects. It serves as a quick reference for understanding the complexities of syndicated lending.

Syndicated Loan Diagram 

          graph LR
    A[Borrower] --> B(Agent Bank)
    B --> C{Syndicate of Lenders}
    C --> A
    style A fill:#f9f,stroke:#333,stroke-width:2px
    style B fill:#ccf,stroke:#333,stroke-width:2px
    style C fill:#ccf,stroke:#333,stroke-width:2px
    B -- Facility Agreement --> A
    C -- Funds --> A
    A -- Repayments & Interest --> B
    B -- Distribution --> C

Agent Bank Responsibilities

  • Communication: Acts as the primary point of contact for all communication between the borrower and the syndicate.
  • Administration: Manages loan documentation, disbursement of funds, and collection of payments.
  • Compliance: Ensures compliance with the loan agreement terms and regulatory requirements.
  • Monitoring: Monitors the borrower’s financial performance and reports to the syndicate.
  • Enforcement: Coordinates enforcement actions in the event of default.

Key Participants

Borrower:

The entity receiving the loan proceeds.

Agent Bank:

Manages the loan on behalf of the syndicate, acting as an intermediary between the borrower and the lenders.

Syndicate of Lenders:

A group of banks or financial institutions that provide the loan.

Lead Arranger/Bookrunner:

Responsible for structuring and marketing the loan to potential lenders.

Types of Credit Facilities

Term Loan:

A loan with a fixed repayment schedule and a specific maturity date.

Revolving Credit Facility (RCF):

A credit line that allows the borrower to draw down, repay, and redraw funds up to a specified limit during the availability period.

Delayed Draw Term Loan (DDTL):

A term loan where the borrower can draw funds over a specified period.

Letter of Credit (LC) Facility:

A facility that allows the issuance of letters of credit on behalf of the borrower.

Overdraft Facility:

Allows a borrower to overdraw their account up to an agreed limit.

Key Facility Terms

Availability Period: The period during which the borrower can draw down funds under a revolving credit facility or delayed draw term loan.
Maturity Date: The date on which the principal amount of a term loan is due to be repaid.
Commitment: The total amount of the loan facility that lenders have agreed to provide.
Utilization: The amount of the loan facility that the borrower has drawn down.

Borrow, Paydown, and Rate Set

Borrow:

Drawing funds from a credit facility. Increases the outstanding loan balance.

Paydown:

Repaying a portion of the outstanding loan balance. Reduces the amount owed.

Rate Set:

The process of determining the interest rate for a specific period, usually based on a benchmark rate (e.g., SOFR, LIBOR) plus a margin.

Margin Change:

An adjustment to the spread added to the benchmark rate, reflecting changes in the borrower’s credit risk or market conditions.

Loan Trading

Trade Buy:

Purchasing a portion of an existing loan from another lender.

Trade Sell:

Selling a portion of an existing loan to another lender.

Assignment:

Transferring all rights and obligations of a lender under the loan agreement to a new lender.

Participation:

Selling a portion of the economic benefits of a loan without transferring the rights and obligations under the loan agreement.

Interest Rate Components

Interest rate on a syndicated loan typically comprises two components:

Benchmark Rate: A reference rate such as SOFR (Secured Overnight Financing Rate) or, historically, LIBOR (London Interbank Offered Rate).
Margin: A spread added to the benchmark rate to reflect the borrower’s credit risk and the lender’s required return.

Interest Rate = Benchmark Rate + Margin

Fees

Arrangement Fee:

Paid to the lead arranger for structuring and syndicating the loan.

Commitment Fee:

Paid on the undrawn portion of a revolving credit facility.

Agency Fee:

Paid to the agent bank for administering the loan.

Participation Fee:

Paid by a participant to the original lender when purchasing a participation in the loan.

Syndicated Loan Activity Keywords

Activity

Borrowing

Paydown

Interest Payment

Margin Change

Rollover

Rate Set

Cashless Rollover

Restructure

Fees

Conversion

Funding Memo

Commitment Increase

Prepayment