Loan syndication

Understanding the difference between loan participation vs. syndication is critically important when fulfilling your borrowing needs. Lenders seeking to generate new avenues of income or meet the local community’s borrowing needs should begin by examining each process. By immersing yourself in the details of loan participation programs and loan syndication programs, you can find a solution that aligns with your needs. Here is what to understand about loan participation vs. loan syndication, with a special focus on the importance of loan participation programs to the modern financial marketplace. Loan Participation vs. Syndication: What to Know What is Loan Participation? Loan participation entails a lender selling portions of an outstanding loan to buyers who may subsequently collect interest and principal payments from that loan. Most loan participation occurs between two or more financial institutions, allowing multiple banks or credit unions to effectively share ownership (and collectively reap the dividends of) any given loan. Loan participation programs can allow all lending participants to share the risks associated with the loan equally, or they can be structured on a senior/subordinate basis to differentially distribute both the risks and rewards associated with the loan to the various lenders managing it. Banks aren’t the only ones who partake in loan participation programs; credit union service organizations or CUSOs frequently band together to share the ownershi...

Live Oak’s loan syndications group enables our team of experts to lend up-market and grow with our borrowers. We work to arrange a bank group to participate in the opportunity for projects that do not fit within the bank’s targeted hold size. With Live Oak as the lead bank, your institution benefits from our industry expertise and knowledge of various loan programs. We provide you with a single point of contact to streamline the process, from start to finish. Loan Servicing A dedicated Business Analyst is assigned to every customer after closing Each Business Analyst manages on average 110 relationships with an industry specific focus. Business Analysts collect quarterly and annual financials with a 90% success rate. (source internal data) Business Analysts conduct updated site visits every 12-24 months Rob Ricciardi VP - Loan Syndications Rob is a loan officer on the loan syndications team, where he is responsible for managing the process of syndicating commercial banking facilities, underwriting participation opportunities and bank relationship management. Previously, Rob was a loan officer for the bioenergy lending department at Live Oak where he focused on developer and investor relationship management while providing structured finance lending opportunities. Rob’s varied experience in closing, underwriting, credit, and lending enables him to provide exceptional service and expertise throughout the loan process. Prior to joining Live Oak, Rob worked as a mutual fund ac...

If a new lender enters a loan syndicate and provides a new term loan or access to a new line of credit, it is considered a new arrangement and not a modification. Therefore, fees paid to that lender and allocated third-party costs should be accounted for in the same way as for a new loan or line of credit (i.e., deferred as debt issuance costs and amortized over the life of the new term loan or line of credit). The modification of a loan syndication will typically be arranged by an investment bank; oftentimes, that investment bank is also a lender in the loan syndication. A reporting entity should assess whether fees paid to the investment bank arranging the restructuring are being paid for third-party services or as a lender fee. If the investment bank is being compensated to perform services that could be performed by a third party, the fee should generally be accounted for as a third-party cost. Question FG 3-3 A reporting entity issues debt to a loan syndicate, which includes two funds managed by FG Group, FG Fund 1 and FG Fund 2. The reporting entity later replaces this debt with new debt issued to a loan syndicate which includes FG Fund 1 and FG Fund 5, which is also managed by FG Group. Should the reporting entity treat the funds as one lender or separate lenders for purposes of determining whether its debt has been modified or extinguished? It depends on how the funds are structured and managed. If FG Group’s funds are effectively operated as separate funds, they s...

What is Loan Syndication? The term “loan syndication” refers to the lending process in which a group of lenders funds a loan for a single borrower. This arrangement often occurs when the loan amount is too large for a single lender or the risk associated with the loan exceeds the risk appetite of any single lender. Thus, multiple lenders join hands to form a syndicate and provide the requested capital to the borrower. Key Takeaways Some of the key takeaways of the article are: Download Corporate Valuation, Investment Banking, Accounting, CFA Calculator & others • It refers to the arrangement in which a group of lenders joins hands to fund the loan requirement of a single borrower. • It usually occurs when the loan amount is too large for a single bank or exceeds a bank’s risk appetite. • In this arrangement, the lead bank takes on the role of the coordinating entity, while the remaining lenders, known as participating banks, collectively share the risk. • There are three major types – underwritten deal, best-effort deal, and club deal. Features of Loan Syndication Some of the main features of loan syndication are as follows: • The need for large loan amounts primarily drives the loan syndication arrangement, making it a key motivation behind such arrangements. • The borrower and the group of lenders establish a single comprehensive agreement, eliminating the necessity for separate agreements between the individual banks and the borrower. • The agreement explicitly outlines...

Some projects are so large that no single company can have all of the expertise needed to do the job efficiently. This is often the case with large construction projects such as building a stadium, highway, bridge, or railroad. In these situations, companies may form a syndicate so that each firm may apply theirspecific expertise to the project. For tax purposes, syndicates are generally considered as • A syndicate is a temporary alliance formed by professionals to handle a large transaction that would be impossible to execute individually. • By forming a syndicate, members can pool their resources together, and share in both the risks and the potential for attractive returns. • In general, businesses in the same industry join to form syndicates. Syndicates and Insurance Risk Syndicates are often used in the insurance industry to spread insurance risk amongseveral firms.

• Loan syndication occurs when two or more lenders come together to fund one loan for a single borrower. • Syndicates are created when a loan is too large for one bank or falls outside the risk tolerance of a bank. • The banks in a loan syndicate share the risk and are only exposed to their portion of the loan. • A loan syndicate always has a syndicate agent, which is the lead bank that organizes the loan, its terms, and other relevant information. • The Loan Syndications and Trading Association provides resources on loan syndications within the corporate loan market. Understanding Loan Syndications Loan syndication is often used in corporate financing. Firms seek corporate loans for a variety of reasons, including funding for The Loan Syndications and Trading Association is an established organization within the corporate loan market that seeks to provide resources on loan syndications. It helps to bring together loan market participants, provides market research, and is active in influencing compliance procedures and industry regulations. A third party or additional specialists may be used throughout various points of the loan syndication or repayment process to assist with various aspects of reporting and monitoring. Loan syndications often require high fees because of the vast reporting and coordination required to complete and maintain the loan processing. JPMorgan acts as the lead agent and brings together other banks to participate. It contracts Bank of America, Cre...

Treasury and Payments Improve your working capital, reduce fraud and minimize the impact of unexpected disruptions with our treasury solutions—from digital portals to integrated payables and receivables—all designed to make your operations smoother and more efficient. Learn more about our treasury solutions: A Full Suite of Client Solutions Our team focuses on the relationship—not the transaction. We invest time in getting to know our clients and their unique situations so that we can provide a custom solution based on a wide range of offerings across J.P. Morgan—including market-leading cash management and treasury service products as well as connections to the investment bank. Part of our commitment to relationships includes facilitating introductions to expand and enhance banking relationships. Real Estate Expertise Our team has deep knowledge and experience in providing syndicated loans for commercial real estate owners and operators, including REITs, investment funds, operating companies, developers and investors. Our expertise ranges from entity-level corporate financings to single-asset transactions (construction, mortgage, bridge and acquisition loans) across asset classes. In addition to helping you identify opportunities to optimize your capital, we provide solutions to manage your short- and long-term liquidity needs. Learn more about our full range of real estate banking solutions J.P. Morgan’s website and/or mobile terms, privacy and security policies don’t ap...

Since 1995, the Loan Syndications and Trading Association (LSTA) has been the industry’s premier platform for all participants in the rapidly evolving syndicated lending market. Thanks to its members, who include a who’s who of thought leaders from major firms industry-wide—including buy-side, sell-side, and supporting services (legal, accounting, consulting, technology, analytics, clearing, and settlement)—the LSTA has remained singularly focused on its core mission: to promote a fair, orderly, efficient, and growing corporate loan market while advancing and balancing the interests of all market participants. The Bylaws of the LSTA set forth the framework for the governance, operation, and management of the Association. The LSTA has a three tiered membership structure (full membership, associate membership, and affiliate membership), and the bylaws define the rights and privileges of each of those classes of members. Only an officer, partner, principal or employee of a full member may seek election to the LSTA’s Board of Directors. The Bylaws also describe the dues structure, the annual meeting and annual report requirements, and set forth the structure, powers, and rules regarding the election of the LSTA’s Board of Directors. Finally, they describe the role of the LSTA’s Officers — the Chair, Vice-Chair, Secretary, and Treasurer. The purpose of the LSTA’s From time to time the LSTA may promulgate additional guidance relating to various topics and issues pertinent to the...

Term debt has a specified term and coupon. The coupon may be fixed or based on a variable interest rate. Upon issuance, the issuer recognizes a liability equal to the proceeds (e.g., cash) received, less any allocation of proceeds to other instruments issued with the debt, other elements of the transaction, or features within the debt instrument itself. The proceeds generally approximate the present value of interest and principal payments of the debt. Debt should be recognized on the date the proceeds are received (settlement date) rather than on the trade date. A debt discount may reflect fees paid by a reporting entity to a lender as part of a debt issuance or the issuance of debt at a below market coupon. When a reporting entity issues debt at a discount, it receives less proceeds than it will repay; thus, the reporting entity is paying a higher effective interest rate than the coupon specified in the debt agreement (i.e., it is paying the coupon and the original issue discount). A debt discount is a reduction of the carrying amount of a debt liability. A debt discount can also be created by the following: • The separation of an embedded derivative (e.g., put option) from a debt instrument. See • The allocation of proceeds to warrants or equity securities issued in connection with a debt instrument. See • The adjustment to the carrying amount of a debt instrument as a result of a fair value hedging relationship. See A debt premium typically reflects the issuance of deb...