Question

For the members of a syndicated loan facility (i.e. the banks involved) outline four benefits of the syndication process and outline four benefits of the loan syndication process for the borrowers.

Answer 1

Four benefits of the syndication process for the members of a syndicated loan facility are:

1. The banks involved are able to optimize the costs involved with managing a large ticket loan as the costs are shared between two or more than two banks.
2. The banks are able to better spread their risks and participate providing a loan which would otherwise would have been outside their scope.
3. Banks are able to optimally share that financial opportunity that may otherwise have been too large for their individual capital base.
4. The liability of each member in the syndicate is limited to their share of the total loan.

Four benefits of the syndication process for the borrowers:

1. Borrowers get more flexibility with regards to structuring and pricing of the loan as the options in front of them increases.
2. It spares the borrowers the time and effort of negotiating individually with each bank.
3. It allows the borrower to get greater visibility in the open market.
4. Borrowers can get the loan terms abbreviated.