Syndicated lending is big business: the amount of money lent in one transaction alone is enough to make your head spin. Take Russia’s Gazprombank for example. In early August 2014 it announced it had paid off a 1.2 billion USD syndicated loan it received from a group of international banks in 2011.
When it comes to syndicated lending, “syndicated” is the operative word. The loan amounts are so massive that no single bank would take on the risk by itself. Instead, it asks a bunch of rich chums (other banks, insurance companies, hedge funds and so on) to come in on the deal and split the risk. And this is where things can get tricky from a logistical point of view.
In contrast to a bilateral loan with one borrower and one lender, syndication has one borrower but multiple lenders. And the scope of function of these lenders creeps further from simply handing over a briefcase full of cash. A deal of this size, and with so many participants, needs to be managed delicately and precisely. Lest we forget, with so many interested parties comes just as many opinions. So let’s break things down a little to get an idea of the whos, the hows, the whats and the whens, and where enterprise collaboration software can lend support.
A single space for all to collaborate within
A typical syndicated loan transaction is initiated by the borrower who appoints a lender called the mandated lead arranger, who in turn advises the borrower on the types of loan facilities available (term loan, revolving loan or both). At the same time a bookrunner is chosen to bring together other lenders that will offer parts of the loan. Additionally, co-arrangers will find even more lenders if need be. Throw into the mix an agent who will facilitate the administering of the loan on a daily basis (point of contact, compliance, postman, record-keeper and payee). Finally, if the loan is secured, one lender will act as security trustee.
When there are so many participants in such a convoluted transaction, streamlined communication is key. Enterprise collaboration allows people to work together in a single online space. But it’s more than just an online forum for people to talk.
The platform offers structure and social functionality that empower groups and individuals to communicate in specific ways with specific goals. Live activity streams allow all people to know what one another are up to. Wikis allow ideas to be iteratively developed with tracked changes, audit trails and comments feeds. Blogs allow knowledge to be communicated without being siloed or lost in the wind (like they would with email). To ensure security, advanced permissioning means participants can only access information they have clearance for (ethical walls).
Documents and secure file sharing
In the early stages of a syndicated loan deal the borrower appoints the arranger via a mandate letter (or commitment letter). On top of this, the mandate letter will usually be signed with a term sheet attached to it. The arranger and the borrower also prepare an information memorandum on the basis of information provided by the borrower during the due diligence process. Added to all that are the syndicated loan agreement, fee letters, facility agreements and so on. All in all, a lot of important documentation.
Such important but sensitive documentation can be easily stored, secured and shared using the secure file sharing module in an enterprise collaboration platform. This module will allow for granular folder and file-level permissions, full version control, check-out, approval workflow, custom metadata, full-text search and digital rights management to protect such confidential information.
From drafting the mandate letter and signing the term sheet to inviting syndicate members, issuing the information memorandum and drawing down the loan. With multiple stages and so many people engaged in an average syndicated loan deal, having the ability to keep up to date with events, meetings and deadlines is unwieldy but essential. Enterprise collaboration software offers three powerful tools to streamline such workflows.
First of all is the tasks module which allows you to track due dates and assign responsibility to team members and partners. Next is the events module with which you can share upcoming events in the group calendar and manage your project milestones, deadlines, meetings, conference calls and other types of events. And finally is the spreadsheet/database module which allows you to automate the due diligence process using pre-configured checklists.A robust collaborative platform offers a myriad of solutions to the challenges faced by a complex deal like syndicated lending. For more information on how HighQ’s range of transaction management solutions can help you close the deal quicker, why not contact us or request a demo.