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! Overview moan Syndication is a funding mechanism
! Process where two or more banks come together to
! Parties
contribute a portion of the loan to finance
! Merits/Demerits
the project.
! Measures for a
successful loan Generally used for funding projects which
syndication involve large sums. Eg. Energy, Infrastructure
! Conclusion

Project Finance is based on limited or ͞


 

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! Overview
! Process
! Parties
! Merits/Demerits
! Measures for a
successful loan
syndication
! Conclusion
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! Overview
! Process
! Parties
! Merits/Demerits

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! Measures for a
successful loan %$  !&!
syndication
! Conclusion

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! Overview 6 formal request is made by the SPV to the
! Process bank to advise and manage the process. The
! Parties SPV mandates the bank to be a lead
! Merits/Demerits manager.
! Measures for a The SPV can invite for competitive bidding
successful loan
syndication where a no. of banks with favorable terms
! Conclusion are chosen to lead the syndicate. In this case,
the banks appoint the lead manager.

The lead bank identifies the interests of the SPV

and develops a convincing credit proposal.
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! Overview The lead bank prepares an information
! Process memorandum, legal documentation and
! Parties invites selected banks for participation.
! Merits/Demerits The Information memorandum includes an
! Measures for a overview of the project, background,
successful loan
syndication company ownership, management, financial
! Conclusion details and previous experiences.
6 full analysis of the project risksͶcompletion
risk, market, political & technology risks is
done to ascertain whether the project is
bankable
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! Overview 6fter signing the syndicate agreement, banks
! Process select the agent to administer the loan.
! Parties The 6gent handles all issues relating to
! Merits/Demerits implementation of project, administration of
! Measures for a loan, repayments to all counterparties.
successful loan
syndication
! Conclusion
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! Overview
! Process
 



! Parties menders are obligated to make financial

! Merits/Demerits resources available upto a preset maximum
! Measures for a amount and on request by the SPV.
successful loan
syndication In case the participatory bank fails to make the
! Conclusion payment, the underwriting bank has to bear
the risk.
   
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The SPV is responsible for all project activities
! Overview starting from construction phase to ensuring
! Process that project is going on as planned and on
! Parties agreed performance levels.
! Merits/Demerits
In the operation phase, the SPV starts making
! Measures for a
successful loan repayments to the lenders through the
syndication agent.
! Conclusion However, the SPV does not take any risk as to
whether the syndication is successful or not.
 
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The 6gent ensures that the loan granted is not
! Overview used for any other purpose by the SPV other
! Process than that mentioned in the credit agreement.
! Parties
The agent monitors the SPV and its
! Merits/Demerits
performance. 6ny default might lead to
! Measures for a
successful loan termination of loan or may force SPV to make
syndication early repayments.
! Conclusion
The 6gent ensures compliance with all the
provisions of the credit agreement.
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   -isk Diversification
! Overview Syndication ensures that in case of any default,
! Process the banks face a lower risk, than if they were
! Parties financing projects individually.
! Merits/Demerits
6lso, the SPV͛s incentive to default is limited
! Measures for a
successful loan under multiple lending due to uncoordinated
syndication monitoring by participating banks.
! Conclusion

Mobilization of Funds
Syndication ensures mobilisation of large sums
for big projects. Eg. Energy, Infrastucture
Banks have limits on lending in specific sectors
hence the solution is to join effort with other
banks
 -isk Exposure
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   There is a risk involved because of the
! Overview uncertainty that the project may not perform
! Process according to plans and the credit agreement.
! Parties With many banks involved, the risks are shared
! Merits/Demerits according to the proportions of their
! Measures for a contributions to the loan.
successful loan
syndication
! Conclusion Information Sharing
The participating banks have access to
diverse information on borrowers,
different sectors and different countries.
Sharing information reduces costs and time
and ensures success of the syndicate
 Competitive Pricing
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Due to competitive bidding, banks offer the
! Overview best terms of the loan. Eg. Easy repayment
! Process schedule, reduced interest rates etc.
! Parties
Stiffer competition results in normal prices and
! Merits/Demerits
maximizes consumer welfare.
! Measures for a
successful loan
syndication
! Conclusion
-eduction in marketing Costs
The participatory banks get the opportunity of
low marketing costs and chances to
participate in future projects.
This provides comfort and additional security to
commercial banks to participate in a
syndicate.
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! Overview
! Process r  
   

! Parties   
   
   
! Merits/Demerits    
 
 
 
! Measures for a  
 
    
 
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! Conclusion         


 

 
   
   

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! Measures for a
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! Overview moan Syndication reduces risk to individual
! Process lenders and this reduces the cost of debt.
! Parties
! Merits/Demerits
! Measures for a However, for loan syndication to succeed, the
successful loan credit agreement should be designed to
syndication
clearly deal with the respective needs of the
! Conclusion
counterparties to the syndicate.
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