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With a volume in 1991 in excess of $450bn, the syndicated loan market is one of the most important elements of the Euromarkets.
A syndicated loan can best be defined as: "A loan made by tow or more lending institutions, on similar terms and conditions, using common documentation and administered by a common agent."
This definition covers all the principal aspects of syndicated lending. The term implies the involvement in the facility, and it is fundamental to syndicated lending that the terms and conditions of the loan are similar for each of the lenders.
The definition also includes common documentation, since it is this element which holds the syndicate of lending banks together.
MARKET STRUCTURE
Syndication is an effective way for borrowers to raise large sums in one operation. A recent Kingdom of Sweden loan for Ecu8bn (circa L7bn) was underwritten by JP Morgan and a handful of other City institutions, prior to general syndication, within three days.
You would not expect to see a syndicated deal for less than $50m. Syndication allows lenders to spread their risks more widely and at the same time is administratively efficient, with the agent bank handling much of the documentation on behalf of the participating banks.
Principal lenders in the syndicated market are the US commercial banks, Japanese commercial and trust banks, and European commercial banks, ranging from large international banks to smaller institutions with a domestic bias.
Borrowers include banks, private sector corporations, sovereign governments, local authorities and state-owned entities.
The term of a syndicated loan could be up to 12 years and more, but average maturities will be of between five and eight years.
There are normally...