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Club deal/ Syndicated loans

Club deal/ Syndicated loans

Dictionary

big ticket loan that is provided by a number of Banks which share the revenues from the deal pro rata as well as collateral provided by the Borrower. The mutual cooperation between the participating banks is concluded in line with Inter-creditory agreement, while the Borrower is represented by the Agent, which acts as Principal Bank having under control collateral and coordinates whole transaction and communication between banks and Borrower. Given this high responsibility, the Agent receives Agency fees as a compensation for this activity. Due to fact, that financing is provided by a number of Banks and as there is a shared legal documentation for all participants, the LMA standardized documentation is applied. When it comes to the purpose of the financing, very often the financing is provided either as some LT-investment loan, Acquisition financing or Assets-based financing. On the contrary, usual Working-capital financing is rather a rare case among the Syndications.

Syndicated deals are usually arranged for high ticket loans (roughly starting at € 100Mio), as for one bank such a commitment could be too risky. An alternative to that is also risk participation (funded/ unfunded), when one bank subscribes whole amount and then shares it with other banks on discrete basis, i.e. without involving Borrower. Other banks may thus reduce the final risk based on this participation on future potential losses.

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