SGS 1 - Syndication + stages in a loan Flashcards
1
Q
What are the stages in the syndication of a loan?
A
- Initial approach to credit manager
- Credit approval (ICC approval)
- Due diligence
- Mandate letter (appointing arranger)
- Term sheet (heads of term - subject to contract)
- Negotiate facility documents
- Syndication
- Ensure conditions precedent complied with
- Signing and completion
- Drawdown
2
Q
Who are the parties to a loan?
A
- Borrower
- Arranger
- Agent
- Syndicate
- Security trustee
3
Q
What are the duties of the arranger?
A
- Advise borrower
- Prepare information memorandum
- Drafting documentation
- Syndication
- Underwrites loan
4
Q
What liabilities does the arranger have, and how does he seek to limit them?
A
Liabilities: - Negligent misstatement - Fraudulent misrep Limitation: - Important notice stating information not verified, not updated and everyone should undertake own investigation
5
Q
What are the duties of the agent?
A
- Postman duties
- Not required to check adequacy of agreements
- Notify parties of any default
- Notify parties of any non-payment
- Agents duties are solely mechanical and administrative
6
Q
What powers does an agent have?
A
- Unilateral action in the interests of the syndicate
- Act upon instruction of majority lenders
7
Q
How does the agent limit liability?
A
- Narrow definition of duties
- Exclusion of liability for fiduciary duties
- Outsource duty
- Acting under majority instruction
- No responsibility for documentation
- General exclusion of liability clause
- No liability for credit appraisal by lenders
- Syndicate must indemnify the agent
8
Q
Key points in negotiating a term sheet:
A
- State subject to contract
- Make sure purpose of the loan includes general corporate purposes
- Confidentiality binding
- Costs binding
