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  3. Banks provide many services to business sectors. Describe syndicated loans and p

Banks provide many services to business sectors. Describe syndicated loans and p

游客2025-06-21  39
问题 Banks provide many services to business sectors. Describe syndicated loans and project financing.
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答案 Syndicated loans
    Concept: It is one in which two or more banks participate, each funding a certain proportion of the loan, using common documentation and the loan is administered by a common agent.
    Features:
    —the loan is made to one borrower.
    —the repayments are made through the agent bank.
    —the bank would normally treat the syndicate as a single unit when considering loan agreements.
    —the loans are usually large.
    —strict examination before loan granted:
    -the banks will require details of the nature of the project, precise financial information and the necessary legal material.
    -the banks may have their experts and consultants to evaluate the project in order to identify the possible risk involved.
    -the bank will charge according to the rate agreement; sometimes may charge service expenses.
    Types of syndication facilities:
    —Syndicated loan:
    -most common form.
    -with a short drawdown period.
    —Revolving credit facilities:
    -allow borrowers access to funds at a committed price for a committed period.
    -the borrowers enjoy the flexibility to draw and repay funds up to the maximum limit of the facility as often as they wish within the committed period.
    —Multiple option facilities:
    -give borrowers a funding commitment over a specifi period of time but allow the borrowers to choose the form of funding: either to request bidding on a note issue or to take advances direct from banks.
    —Other types of facilities include:
    -standard Eurocurrency facilities;
    -SNIFS;
    -RUFs.                                                                     
    Process of a loan syndication:
    —pre-mandate:
    -identify the borrower’s needs.
    -obtain credit approval to make an offer.
    -submit a competitive bid to the borrower.
    -negotiate to win the mandate and agree a syndication strategy with the borrower.
    —mandate:
    -documented in the form of a mandate letter from the borrower to the arrangers.
    -confirm the terms of the loans.
    -the mandated bank will make a firm, underwritten offer to deliver the funds on the term specified.
    —post-mandate:
    -prepare the information memorandum.
    -commence the syndication process.
    -instruct legal counsel to prepare the legal documentation.
    -allocate participation and send agreed documents to the participating banks.
    -negotiate the legal documents with the banks and borrower.
    —closing:
    -administration details worked out.
    -signing ceremony organized.
    -hand over the file to the facility agent.
    -tombstone.
    —post-closing:
    -making payments.
    -deal with waivers, amendments.                                         
    Project financing:
    Concept: It is the finance for a project wholly or partly on the credit of the project itself, with the project revenue as the sole or primary source of repayment.
    Features:
    —the project involves the construction of an engineering undertaking.
    —the terms of financing could be in the form of an open credit or complete finance throughout the life of the project.
    The types of the project financing:
    —non-recourse or "true" project financing:
    Cash flow from the project is the sole means of debt services, with no direct legal credit support by sponsors.
    —recourse or "credit supported" financing:
    If the project cash flow is not sufficient, there is a direct legal obligation for project sponsors or other interested parties to step in and ensure both completeness and timeliness of debt service.
    Repayment schedule:
    —arranged in the form of instalments of fixed payments over periods of time after the project is completed
    —equity sharing
    Categories of suitable projects:
    wide range of ventures including the development of oil and gas fields and other natural resources, power plants, industrial and chemical facilities, paper facilities as well as the construction and operation of luxury hotels and major agricultural developments;
    —large scale infrastructure projects account for much of today’s project finance activity.
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