Syndicated loan
Syndicated loan - also Metakredit or syndicated loan (English " syndicated loan" ) called - is in essence the granting of a unified credit loan by at least two banks to a borrower.
Legal bases
The results summarized in a consortium of banks under German law a civil law partnership ( GbR or BGB -Gesellschaft) under § § 705 et seq. A consortium of banks of this kind can be organized as internal or external consortium, depending on whether the borrower is notified of the establishment of a consortium of banks or not. The outer consortium occurs against the borrower as such in contractual relationships, where the lead manager to the borrower is also on behalf of the consortium. For the internal consortium, the lead manager acts solely in its own name but on behalf of the syndicate, who will be announced at the borrower open interior consortium. Legal relations exist in the inner consortium also only between borrowers and lead manager. Just as an external consortium enjoys legal capacity and the capacity and thus can be the holder of a loan receivable and the debtor of the claim for payment of the borrower. Notwithstanding § 709 BGB, the management authority lies with the consortium, which includes at least the leadership of the negotiations with the borrower. According to the jurisprudence of the Supreme Court, the pool members adhere accessory to breaches of duty by the consortium lead. These external liability can be distributed in the consortium on the internal liability within the consortium. For the internal relationship between the consortium and the underwriters the rules on the management contract apply (§ § 675 ff BGB). The centralized consortium loan processing ( loan disbursement, billing and collection of interest and principal payments ) is taken from the consortium that charges proportionately in the internal relationship with the syndicate, which is why the inner consortium is regularly performed as a centralized consortium. The sole owner of the credit claim in both cases is the lead manager, so that the borrower only needs to account for this a single loan liability.
The syndicated loan is not an independent credit, rather, a particular form of settlement of a banking business. Reasons for the settlement of a syndicated loan are risk diversification to high volume of a loan for a single bank ( concentration risk ), existing bank account and possibly the customer.
Lead
The lead manager ( the sole lead manager ) or several ( joint-lead manager ) takes over as primus inter pares, the coordination between the consortium and the borrower both in the preparation of the credit agreement as well as in the settlement of the syndicated loan. He shall be responsible - in deviation from § 709 BGB - the sole power of management, consisting of at least the negotiations with the borrower. The lead manager usually takes over the function of the bookrunners, which defines in particular the allocation of Konsortialquoten. In general, the consortium also carry a higher Konsortialquote than the other pool members. The lead manager is in an external sole owner of the credit claim, provides for the payment of the entire syndicated loan and for the calculation and collection of interest and principal payments. The syndicate members are only involved in the law of obligations proportionately. Internally, he distributed all credit transactions proportionately to the consortium. This is done by way of derogation from the provisions of § 722 BGB, so that the default risk is only supported proportionately. In order to limit the liability of the syndicate members on their Konsortialquoten, an express limitation of liability in the consortium is required, with a marked made externally control the internal relationship is not enough.
Konsortialvorbehalt or underwriting
A ( strict ) syndication or Konsortialvorbehalt the lead manager is under the condition that the final amount of credit extended by the actually acquired Konsortialanteilen the consorts dependent ( best effort ). The lead makes up the granting of a syndicated loan of a certain amount of corresponding Konsortialzusagen the consorts dependent. If the loan amount is not reached, the syndicated loan materializes either not or only the amount of original Konsortialzusagen. If demand is high, it may also lead to higher than expected syndicated loans. Banking supervisory regulations are only the loans actually granted should appear, if the desired loan amount should be exceeded. In consideration of the equity share from the consortium only the loan amount is then provided to the borrower, to the maximum Kosorten provide in a timely manner.
In contrast, the underwriting consortium binding obligation to provide a well-defined amount of credit available, there is no requirement on the entire syndicate shares of future cohorts; while the lead underwriter takes the risk, the entire loan amount to have alone represent the worst case. In underwriters (securities) are in the first case a Begebungskonsortium that is subject to regulation in § 1 para 1 sentence 2 of the Banking Act No. 4 ( broking ). The underwriting applies for regulatory purposes as underwriting fees in accordance with § 1 para 1 sentence 2 of the Banking Act No. 10.
Form and content
Outside consortium of syndicated loan agreement is concluded on behalf of the consortium, so that the unincorporated consortium is entitled and obliged; the consortium represents here the consortium. Konsortialkreditverträge respect the content largely a credit agreement. These are supplemented by the konsortialtypischen regulations relating to the syndicate members with each other. Even in Germany, in form and content developed by the British Loan Market Association Konsortialvertragsgrundsätze have prevailed so far as the German law permits ( choice of law ). Therefore, based on the English model consortium agreements often contain all possible arrangements, many of which are unknown to German law. The lead manager or Documentation Agent ( Documentation Agent ) is negotiator on behalf and behalf of the consortium of banks to the borrower. The syndicate members are involved in the intermediate results and give their opinions on this. The results thereof are included in the syndicated loan. Since the borrower has nothing to do with a bank alone, the consortium also includes clauses on the voting behavior of the Underwriters under each other in the event that the consent of the consortium is required. In most cases there must be 2 /3 of the consorts - measured by their Konsortialanteil - agree if about the consortium should waive a right recognized them (so-called waiver request).
Also in Germany, the model contracts of the LMA have largely prevailed. They are based on the Anglo-Saxon case law that tries to cover all conceivable situations by rules. Is preceded by a section with definitions of self as known presupposed terms (such as interest rate and margin). Not usual is the quote by law or the inclusion of the terms and conditions of credit institutions. It follows a number of clauses, some of which are only valid under English law. Among the usual clauses include the negative pledge, pari passu clause, covenants, cross-default clause, the default clause or the significant deterioration in the financial circumstances (so-called material adverse change clause).
Purpose and Objectives
Syndicated loans are granted if the loan amount for an individual bank is too large and this report would exceed legal thresholds (particularly large loan in accordance with § 13 of the Banking Act ) or if clumps risks would arise for an individual bank. By distributing on different, non- affiliated banks this risk is mitigated. The syndicated loan is thus an essential tool for risk diversification. The borrower is spared with possibly different loan terms, because he needs to communicate with the syndicated loan only with the lead and gets uniform credit terms by the inclusion of a variety of syndicated loans at various banks. Is the syndicated loan repaid, so will the purpose of the consortium, for which it was formed.