The lead bank or underwriter, also known as the arranger or lead lender, may contribute a proportionally more significant share of the loan. Syndicated loan financing is usually sought after by large borrowers who require large amounts of capital that exceed a single lender’s resource or underwriting capacity.
In general, the arrangers serve the investment-banking role of raising investor funding for an issuer in need of capital and receive a fee for this service. Syndicated loans started as a medium for allowing lenders to lend large sums of money to a single borrower where the sums involved went beyond the credit appetite of a single lender. The borrower can be a corporation, a large individual project, or a sovereign government.
Each lender in the syndicate contributes part of the loan amount, sharing the lending risk. It is structured, arranged, and administered by one or several commercial banks or investment banks known as the lead arrangers. This type of financing can also be referred to as a syndicated bank facility. Felix: Learn & Analyze Continued education, eLearning, and financial data analysis all in one subscriptionĪ syndicated loan is financing provided by a group of lenders known as a syndicate, who collaborate together to provide funds for a single borrower.Felix: Learn & Analyze All our Wall Street-recognized courses in one new subscription.