Syndicated Loan
AdvancedA syndicated loan is a large loan provided to a single borrower by a group of lenders, called a syndicate, organised and managed by one or more lead banks.
Some borrowers, such as large companies or governments, need more money than one bank is willing or able to lend. Syndication spreads the loan and its risk across many lenders.
The lead bank, often called the arranger, negotiates terms with the borrower and brings in other lenders. An agent bank administers the loan, collecting payments and distributing them to the syndicate members.
For example, a company financing a large acquisition might borrow 500,000,000 through a syndicated loan, with ten banks each providing a share. The company deals mainly with the agent bank rather than with all ten lenders separately.
Syndicated loans are widely used for acquisitions, refinancing, large projects and general corporate purposes. They usually have floating interest rates. Lenders can often sell their shares of the loan to other investors in the secondary market. Leveraged loans, made to companies with high debt, are an important part of the syndicated loan market.
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