Syndicated and bilateral lending
Syndicated loan is a credit issued by several banks (instead of one) consolidated in a syndicate.
Syndicated crediting as a banking facility has the following discriminative features:
• Joint liability. The pool of creditor banks acts in relation to the borrowing concern as the uniform party. The creditors bear joint liability before the borrowing concern, while the latter is liable to them all simultaneously.
• Equality of the creditors. Nobody has any advantages in respect of the debt collection, and all the funds collected for the credit repayment or from realization of the collateral, are divided proportionally to the amount provided by each bank.
• Uniform documentation. Agreements concluded within such credit facility are multilateral, they are signed by all the creditors and the borrower without possibility to conclude separate agreements.
• Information sharing. All data concerning such syndicated loan must be known both to the creditors, and the borrower. Information interchange is carried out through the arranger bank, which is obliged to notify all the parties to the deal.
Any assets used in standard bilateral crediting may be used as collateral in syndicated crediting:
• equity;
• real estate;
• equipment;
• raw materials and finished goods;
• third party guarantee.
Related practices
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30.07.2010
