Bank Credit Syndication
A syndicated loan is a credit lent out by a syndicate or a group of lenders and is structured or arranged by one or several commercial or investment banks called arrangers.They permit risk-sharing among the potential financial institutions without disclosure and market burdening that bind issuer undergo. These credits account for an impressive international financing, roughly one-third, including bond, commercial paper, and equity issues.
The prime motive of syndicate lending is to distribute the jeopardy of a borrower’s default across multiple lenders like banks, institutional investors such as hedge funds or pension funds. The reason why such an arrangement of syndicate lending is brought in place is that syndicate lending is larger than standard bank loans, and in those circumstances, even one borrower-default could devastate a single creditor.Syndicated loans are centered on the creation of an alliance of smaller banking institutions that, because of this union, can meet the credit needs of the borrower. This creation is accelerated by appointment of an agent who manages the account.
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