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DF SGS 1 Consolidation
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Comprehensive exam notes on SGS 1 debt finance based on the learning outcomes and small group session activities at BPP.
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Summary of a syndicated loan transaction1. Bank (arranger) and borrower agree term sheet.
2. Borrower mandates arranger to raise finance through a syndicate.
3. Due diligence is carried out on the borrower.
4. Drafting facility agreement, information memorandum, fee letters and any ancillary documentation (e.g.
debenture, inter-creditor agreement).
5. Negotiation: between arranger and borrower.
6. Syndication: arranger sells the deal to syndicate lenders whilst the negotiations are on-going.
7. Possible further negotiation: between the arranger (on behalf of the syndicate) and the borrower.
8. Signing, and possibly closing, if the CPs are met.
1. What is the role of the Arranger? (aka ‘lead manager’)
Appointed via Mandate Letter in exchange for ‘arranger fee’
Appointed by the borrower at the start of the transaction
Usually expected to provide substantial portion of total facility
Duties in relation to setting-up the loan (ceases on signing clause 26.3 LMA)
1. to advise the borrower (costs, interest rates, loan structure, process etc.)
2. due diligence
3. drafting loan docs and negotiation w/t B (i.e by appointing solicitors)
4. Marketing the loan by way of information memorandum
i. marketing doc
ii. This will be highly sensitive information (subject to confidentiality)
iii. unregulated (but there is a market expectation as to what should be included)
iv. confidentiality undertaking usually drafted by Arranger or LMA
Syndication can be done either by: [re mandate letter]
1. ‘Best efforts’ (I will use my best efforts to get the money for you but cannot guarantee the
syndicate will give you the money) or
2. Underwritten (funds guaranteed) – if the arranger cannot get sufficient numbers of lenders in
the syndicate to lend the full amount to the borrower, the underwriting banks (arranger is one
of them) will make up for the shortfall.
Common for the Arranger to then be the Agent -> SOS! Be clear as to the hat the bank is taking
because their duties can change (arranger is a prestigious role and allows bank to forge relationship
w/t borrower and offer them more business
Potential liabilities of Arranger
o Misinformation about the borrower to syndicate lenders
Usually lead to event of default (i.e. acceleration of loan)
Fraudulent/negligent misrepresentation (A was reckless or knew statements were incorrect)
Negligent misstatement (Bs need to est. that A owed them a duty of care to provide info)
o Breach of fiduciary obligations
Exclusion of liability (NB: NOT criminal liability!)
‘Important Notice’ in front of Information Memorandum
1. B is solely responsible for the information memorandum, and the arranger is not responsible for the
information contained in it;
2. A has not independently verified the contents;
3. syndicate lenders will not rely on the memorandum to make their investment decision, and each bank
should undertake its own assessment in deciding whether to participate in the loan; and
4. arranger is not responsible for updating the information.
2. What is the role of the Agent?
acts as an agent of the syndicate lenders (Majority Lenders – i.e 66 2/3 of total loan
commitment) and not the borrower (+ certain decisions to be decided unanimously)
Agents can act unilaterally (i.e if borrower defaults, the agent can accelerate the loan unilaterally
– but in practice they will take Majority Lender’s instructions to avoid any liability)
The agent administers the mechanics of the loan, and will be the main point of contact between
the syndicate and the borrower throughout the life of the loan, as far as the mechanics of the
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