The document discusses concepts related to loan syndication, including the roles and responsibilities of parties involved such as the lead arranger and agent bank. It provides details on the syndication process from pre-mandate activities like obtaining a mandate letter and issuing an information memorandum, to post-mandate tasks such as obtaining commitments from participating banks and finalizing loan documentation. Key stages include feasibility analysis, marketing the deal to potential participants, and closing the syndication transaction.

1. CONCEPTS OF SYNDICATION
FINANCING:
PROCEDURES & DOCUMENTATION, LEAD & AGENT BANK’S
RESPONSIBILITIES
Dr. Md Abdullah Al Mamun
Deputy General Manager
Agrani Bank Limited
Dhaka, Bangladesh.

2. INTRODUCTION
MEANING: SYNDICATION
Syndication means joint financing by more than one bank to the same borrower against a
common terms and conditions governed by a common document (or set of documents)
OBJECTIVES OF SYNDICATION
•To spread and share the credit risk among all the participating banks.
•Enhance the return on assets by arranging the deal and taking a disproportionate
amount of the fees from the transaction.
•To comply central bank’s instruction where it was been emphasized on loan
syndication by more than one banks in cage of large loan.
•To create leadership in the syndicated credit market by the Lead Arranger.
•To satisfy the minimum criteria of diverse group of banks in the syndicated market
by the borrower where it was not possible for one bank.

3. TYPES OF SYNDIACTION
The syndication market can be segmented into international and domestic
transaction. An international transaction for a borrower can be defined as one which
is not denominated in borrower’s domestic currency. A domestic transaction can be
defined as one which is denominated in the borrower’s domestic currency.
TYPES OF FACILITY THROUGH SYNDICATION
The syndicated credit market uses many instruments and has developed a stream of
new products to meet borrower needs and to take advantage of changes in the
markets. Out of many instruments SYNDICATED TERM LOAN is most popular in our
country. At present, many non-funded facilities are being provided through
syndication.

4. PARTIES OF SYNDICATION
Lead Arranger:
Lead Bank or Arrange has to co-ordinate all the activities at various stages
of handing proposal and raising the fund from Bank/Financial Institutions.
Lead Arranger : Captain of Loan Syndication Boat:
The borrower nominates lead bank. It is very important factor for a borrower
to nominate Lead/Arranger in the light of maintaining long term relationship.
It leads to a Lead Bank being an Agent Bank of syndication, which is common
practice. For this reason, it should be an organization with which the borrower
is likely to feel comfortable over the whole loan period.

5.  After analyzing all the relevant aspects of risks, Lead Bank will help the
borrower by taking proper steps and will set a plan to raise the fund from
the Banks/FIs to set up the proposed project. A Time Schedule to be
prepared by the Lead Arranger to close the syndication deal (Format is
enclosed).
 A good profession arranger will always be able to add something to a
borrower’s own deliberations. It should be able to suggest amendments and
enhancements, which will make it easier for a syndicate to take up the loan
without compromising its essential elements.
 It is very important that the lead bank has an in-depth knowledge of the
individual borrower. This applies not only to the particular company but also
to the wider environment in which it works, the economic pressures, the
competitive environment and so on.

6.  As part of the process of selecting a potential syndicate leader it will be
necessary to decide whether it can sell this deal to the sort of syndicate
that is desired. If a high quality group is the aim, then a high level of past
performance in similar transactions will be required in order to
encourage other experienced banks into the syndicate.
 Credibility can be equally important when dealing with less heavyweight
players, who will rely to a much greater extent on the senior members of
the syndicate.
 The Lead Bank/Arranger has the responsibility for much of the selling of
the loan to participants.
 The Lead Bank will be the first port of call for questions and needs to be
able to answer them authoritatively in order to lead off problems and
sensitivities before they arise. This role will be particularly important with
respect to syndicate members who do not know the borrower
particularly well.

7.  Agent will preserve all security documents and will do all the administrative & monitoring
activities tenure of the loan.
 The agent bank’s role is to act as the agent for the banks (not for the borrower) and to co-
ordinate and administer all aspects of the credit facility once relevant documentation has been
executed.
 The activities of agent bank include the disbursement of monies from the syndicate to the
borrower, after satisfaction of relevant conditions precedent, and will also cover collection of
monies, essentially commitment fees, front-end fees, interest and repayments of principal,
from the borrower on behalf of the participating banks.
 The agent will also be responsible for transmitting any post-closing waivers or amendments
requested by the borrower and negotiating them with the syndicate banks.
 The responsibilities and role of the agent in cases an event of default has occurred.
 Inform the participating banks regarding progress of the project time to time as per clause of
facility agreement.
 The agent will send the audited financial statements regularly as per clause of facility
agreement.
 The agent will call a review meeting time to time where the borrowers and the representatives
of the participating banks will be present.
AGENT

8.  Participating banks/ Financial Institutions (FIs): A group of Banks/FIs
committing to some extent for participation in the syndicated under
lead arranger;
 Joint Arranger/ Co-Arranger: A group of mandated banks who will
act jointly to raise the fund from the syndicate market for the
borrower.
 Lead Manager: A senior underwriter or a Bank/FI committing to the
highest level of participation.
 Manager: A second tier underwriter or a bank committing to the
second level of participation.
 Co-Manager: A bank committing to a third level of participation.
 Borrower: An institution or individual that arises funds in return for
contracting into an obligation to repay those funds, together with
payment of interest at determinable periods over the life of a facility
to the agent.

9. PRE-SIGNING STAGE
 PRE-MANDATE PHASE:
1.Selection/Identification of Borrower for Syndication;
2. Built-up continue relationship with the borrower;
3. Round Table discussion with the borrower in Loan Syndication Unit of the Bank and
articulation/structuring of the borrower’s need from the syndication credit market;
4.Preparation of Team Sheet by Loan syndication unit based on discussion with the
borrower: (Term sheet is a document, which is not generally intended to be legally binding
until it forms part of a formal offer, setting out the main agreed and conditions to a
transaction between the borrower and arranger)
5.Discussion with the top management of the bank for finalization of Term Sheet for
obtaining letter of Mandate from the borrower and top management of the Bank on this
issue followed by special entertainment and gift.
(Mandate is the authority to act in the marketplace on behalf of a Borrower to the market
based upon terms and conditions, which have been agreed between the Arranger and
Borrower.)

10. POST-MANDATE PHASE:
1.Obtaining letter of Mandate from the Borrower along with loan processing
fee;
Contents of Terms Sheet/Letter of Mandate:
 Name of Lead Arranger
 Name of Borrower
 Name of Facility
 Currency
 Total Project Cost
 Syndicated Amount
 Minimum Participation Amount
 Period
 Purpose
 Repayment
 IDCP (Interest During Construction Period)
 Debt-equity Ratio
 Pricing/Interest

11. Loan Processing Fee (Flat):
A lump sum amount to be paid to the Lead Arranger for Processing the loan in the
syndicated credit market. A loan-processing fee is non-refundable.
Syndication Fee/Arrangement Fee (Flat):
Fee to be paid on syndicate amount before singing of the agreement to the mandated
bank/Lea Arranger or group of banks for arranging a transaction (This fee will not be shared
to the participating banks).
Agency Fee (Flat):
Fee payable on syndicate loan amount to the Agent for preserving all security documents
and for administrative & monitoring as agent tenure of the loan.
Participation Fee (Flat): Fee to be paid on syndicated loan amount to the Lead Arranger
before signing of the agreement which will be shared among the participants on pro-rata
basis.
Management Fee (Annual): Fee on outstanding amount of the facility after end of every
loan year during loan period to be shared by all the participating banks on pro-rata basis.

12. Commitment Fee (Quarterly):
An annual percentage fee payable to the lead Bank on the undrawn portion of a facility made
available by it to a borrower. This fee is typically payable quarterly in arrears and to be shared
on pro-rata among the participants.
L/C Commission:
L/C will be opened(for import of capital machinery and equipment for the proposed project) by
the Front Bank (Lead Arranger or L/C opening Bank) and some percentage of commission to be
realized the Front Bank. L/C opening Bank (Front Bank or Lead Arranger) may retain some
percentage as skim of L/C commission and the rest will be shared on pro-rata basis.
Escrow Account:
Escrow Account is opened pursuant to the Escrow Account Agreement into which all funds
accrued in all accounts of the borrower permitted under this Agreement shall be paid into and
in respect of which the borrower shall give irrevocable instructions to the bankers of such
accounts to transfer the proceeds thereof to Escrow Account in accordance to the term of this
Agreement.

13. Supplier’s Guarantee:
Guarantee from the suppliers for due performance of the machinery/commercial production
will be obtained before payment to the suppliers. The suppliers will provide a Guarantee
from a reputed bank for minimum 10% of the invoice value of machinery ensuring the quality
of machinery, production capacity and commercial production.
Available period:
The period in which the facility to be availed by the borrower after the date of signing of the
facility agreement.
Security Packages:
Against the syndicated facility will be sanctioned includes pari-passu charge by way of
registered mortgage of project land and building, pari-pasu charge on machinery and
equipment of the project, personal guarantee of the directors & their spouses, corporate
guarantee of sister concerns etc.
Legal Expenses:
All legal cost relating to prepare the documents by the Lead Arranger to be borne by the
borrower. But vetting of the documents by the participating banks to be borne by the
participating banks.

14. Syndication (Best effort Basis):
Placement in syndication market where loan facility has not been fully underwritten,
the arranger will agree to use its best efforts to attract sufficient lenders to completed
the syndication deal in the amount required by the borrower.
2. Obtaining Feasibility Report on the Project from the borrower;
3. Collecting CIB Inquiry Form on the customer for obtaining CIB report from Bangladesh
Bank on the Borrower;
4. Obtaining Board’s Approval/Consent for raising fund under lead management of the
Bank and determining Lead bank’s stake;
5. Officials of Syndication Unit of the Lead Bank may visit the supplier’s country to observe
the supplier’s (of machinery and equipment) performance and the project where the
supplier supplied the same machinery. If it is not possible to visit before opening of L/C, the
visit program may be arranged before shipment of machinery & equipment of the project.
6. Offer letter may be issued to the prospective participating Banks/FIs(before sending IM)
for obtaining ‘Soft Commitment’ which may touch about the project, sponsors, pricing and
period.
7. Preparation of Information Memorandum(IM) after studying all relevant aspect of the
project for viability of the same (if necessary, expert opinion of technical expert, market
survey to be done by the lead arranger to strengthen the IM);

15. CONTENTS OF INFORMATION MEMORANDUM (IM)
PART-I
i. Circulating Page(Cover Page of IM); (Cover Page includes a indistinguishable, colored,
meaningful and attractive photographs)
ii. Disclaimer: Second Page of IM;
(Statement made by the lead manager as representative for the underwriting Syndicate and
contained in offering documents, which asserts, inter alia, that certain information provided in
the prospectus was supplied by the borrower and is therefore not the responsibility of the
managers. Exculpatory language is normally placed inside the cover of the information
memorandum to reinforce the importance for each bank of performing its own independent
financial and economic analysis of the borrower)
iii. Contact Persons;
iv. Table of context (Section wise with page No.)
v. Executive Summery
vi. Management of the Company
vii. Market Aspect;

16. viii. Technical Aspect;
ix. Performance of Supplier;
x. Financial of the company;
xi. Group performance of the Company;
xii. Risks and Mitigates;
xiii.CIB Report(Content)
xiv. Representation & warranties;
xv. Appendices of Market Summery;
xvi. Any other section may be included which depends on the nature of project
& products.

17. PART-II
ANNEXURE-A : DETAILS OF FINANCIAL ANALYSIS
 Total cost of the project
 Fixed cost of the project
 Summarized cost of the project
 Item wise price of machinery and equipment (to be imported)
 Project Implementation Schedule
 Working Capital Assessment
 Earning Forecast
 Sensitivity Analysis
 Sales Estimation
 Cost of Goods Sold

18.  Detail break-up of:
 Raw materials;
 Detail duty Structure of raw materials;
 Wages and salary;
 Water, power and Fuel;
 Stores and spares;
 Repairs and maintenance;
 Rent, ax and Insurance;
 Depreciation cost;
 General, Administrative and other Expense;
 Financial Expense;
 Break-even Analysis;
 Fund flow Statement;
 Project balance sheet;
 Financial rate of return;


19. ANNEXURE-B : COPIES OF SUPPORTING DOCUMENRTS OF IM
•Copies of quotation of machinery and equipment (to be imported)
•Copies of quotation of local machinery
•Copies of Brochures of supplier of machinery and equipment
•Copies of performance certificate of the of supplier of machinery and equipment
•Copies of credit report on the supplier of machinery and equipment
•Copies of documents of price verification of the machinery and equipment
•Copies of certification of valuation of land development, building and civil works
•Copies of competitive quotation of machinery and equipment
•Copy of BOI registration
•Trade license
•NOC from competent authority (i.e. Union parishad etc)
•TIN Certification
•City corporation Certification

20. •Environmental clearance
•Process flow Chart
•Site Location map;
•Factory Layout;
•Clearance of gas Connection;
•Bio data of all Directors;
•Net worth statement of all Directors;
•Bio data of all Technical persons;
•Copy of Certificate of incorporation;
•Copy of memorandum of Association and articles of Association;
•Bank’s Certificate/Declaration regarding liability position of all sister concern of the company;
•Detail organ gram (with Responsibility Accounting);
6. Offer Letter for final commitment and circulation of information Memorandum to the Banks
/FIs (to be addressed to CEO of the prospective participating banks/FIs)

21. 7. CONTENTS OF OFFER LETTER
- Overview of the project;
- Overview of the management;
- Over view of the Group;
- Specialty of the project;
- Contract person name, telephone, fax, e-mail etc
- Specific date of closing the syndication deal;
- other if any.
- To be signed by the CEO of lead Arranger.
8. ROADSHOW: A presentation to potential syndicate members by the borrower, Usually it is
organized by the arranger and held in more than geographic location.
9. Persuasion to the banks/FIs for obtaining consents
10. Obtaining CIP (Commitment in principle) at first from the prospective participating bank/FIs.
11. Reply all the queries of the participating banks/FIs, if any and satisfy them as soon as
possible (without any delay)

22. 12. Arrange a site visit program by all the prospective participating banks/FIs
13. Determination the strategies for raising fund from the prospective participants and
involve the top management of the Lead Arranger;
14. Build up core relationship with the dealing officials of the participating banks/FIs by the
officials of lead Arranger and find out the way to obtain final approval at the earliest and take
action plan participant to participant.
15. Inform the status of fund raising position to the top management of the Lead Arranger
by Syndication Unit (of Lead Arranger)
16.Obtain Final Commitment from the banks/ FIs;
17.Place a Memo before the board informing detail status of fund raising position as Lead
Arranger and finalization of the stake of all the participants along with the lead Arranger’s
stake and finalization of amount extending for working capital facility to the borrower;

23. 18. Status of fund raising of the syndication deal:
Equal Subscription: Raised amount in equal of the deal target ;
Over Subscription: Raised an amount in excess of the deal target;
Under Subscription: Raised an amount in lower of the deal target.
19. Giving indeed thanks (letter) to the CEOs of the participating banks/FIs(to extend their
co – operation to close the deal) from the lead Arranger (to be signed by the CEO of the
lead Arranger);
20.Preparation of documents of syndication by Bank’s panel lawyer;
21.Send the set of documents to the participating Banks / FIs for their vetting , view/
suggestions, if any ;
22. Incorporate the views / suggestions of the participating banks with consultation with
the lawyer and finalization of documents;

24. NAME OF SOME SYNDICATER LOAN DOCUMENTS:
•Facility Agreement;
•Pari Passu Security Sharing Agreement;
•Escrow Account Agreement;
•Agreement for Assignment of Insurance;
•Agreement for Assignment of Contract;
•Projects Funds and Share Retention Agreement;
•Subordination Agreement;
•Deed of Mortgage;
•Letter of Hypothecation (machinery to be purchased);
•Letter of Hypothecation ( existing machinery);
•Letter of Hypothecation ( Balance on the account of Escrow Account);
•Power of Attorney to sell the hypothecated machinery;
•Letter of Undertaking of all the Shareholders;
•Personal Guarantee of the sister concerns;
•Letter of Continuation;
•Demand Promissory Note;
•Letter of comfort;

25. 23.Requesting the participating banks to give the name of signatory and witnesses to execute the
documents and the name of the Lending Offices where the syndicated fund will be disbursed;
24.Selection of Venue, Chief Guest and send the invitation to the guests;
25. Arranging a formal Signing Ceremony for signing the Facility Agreement and other documents
by the Borrower, the Management of the Lead Arranger and Agent and the participating Banks.
An executive and attractive banner will be prepared by the Lead Arranger for formal signing
ceremony;
26.Making Tombstone: Record the name of the borrower, the date, the amount and type of
transaction, the name of banks that committed to the transaction, the name of Lead Arranger
(Arrangers, Co-Arranger, Joint Arranger) and the name of agent (s). The position of the banks in
the tombstone is determined by the status accorded to each bank based on its commitment.
Banks name may appear in several times in the tombstone: for instance a sole arranger may
appear as the Lead Arranger, Lead Manager, participant and as the agent also (Copy of tombstone
is enclosed).
It may be noted that Arrangers may have their own distinctive styles for tombstone, which are
used whenever possible. Media can also be used for publishing of signing ceremony.
27. Brochure: It may be produced by the borrower by giving general idea of the project on the
occasion of the signing ceremony (Sample copy is enclosed).
28.Other Signing Gifts : Signing Pen , Gift Box, Special entertainment etc.
29.Closing the Syndication deal primarily and starting the syndication in real sense.

26. POST-SIGNING STAGE
1.Issue Sanction Letter of the borrower from the Agent;
2.Completion of all the documentation/mortgage formalities as per sanction terms and
conditions and Facility Agreement and other syndication agreements;
3.Send a copy of the set of all documents to the borrower and the participating banks
attested by the authorized signatory (person) of syndication unit of agent bank;
4.Opening of L/C for import of capital machinery and equipment by Front Bank/Lead
Arranger/Agent;
5.Distribution of participation fee to all the participating banks by the lead arranger/agent
on pro-rata basis;
6.Distribution of L/C commission to all the participating banks by the lead arranger/agent;
7.Prepare draw down schedule and send draw down notice to the participating banks/FIs
as per Facility Agreement and collection of fund;
8.Send the Audited Financial Statement of the company to the participating banks as per
facility agreement;

27. 9.Send the progress report on the project to the participating banks describing the details
works of the project completed and the contribution of the equity of the borrower;
10. Preparation of Investment Schedule of the project;
11. Preparation of Repayment Schedule;
12. Arrange Site Visit Program time to time before starting Trial Production and Commercial
Production by the Lead Arranger/agent;
13.Obtain NOC from the participating banks/FIs, if there is any change in Means of
Finance/Project Cost or any change of terms & conditions of the Facility Agreement or other
Arrange review meeting with the borrower, participating banks and the Lead time to time
for syndicated documents;
14. exchanging views with each other regarding progress of the project and to enhance the
relationship with the Lenders and the Borrower. Minutes of the meeting to be distributed to the
borrower and participating banks/FLs in time;
15. Distribution of installment of syndicated loan to the participating banks/Fs as repayment
schedule;
16. Proper monitoring of the syndicated loan by the Lead Arranger/agent and provide
any information about progress or any other issue of the project;
17. Reconcile the outstanding amount with all the participating banks along with principal
and interest;
18. Closing the syndication deal by the Lead Arranger/Agent in real sense by payment of
last installment to the participating banks and reconciling all the calculation of the syndication
deal.

28. STEPS MAY BE TAKEN BY THE COMMERCIAL BANKS / FIS
TO DEVELOP THE SYNDICATION MARKET
1.Bangladesh Bank has already emphasized on loan syndication and they have issued circulars
on this issue time in case of any large loan to diversify the risk and for in depth individual analysis
before financing to any project. (BRPD Circular No.13 dated December 23, 2002)
2. Establishment of separate Syndication Unit in all Banks;
3. Sending the officials of the Syndication Unit in the training program on
Loan Syndication (domestic & foreign);
4. Understanding the nature of work of Syndication unit by the top management of Lead Bank
and the participating bank regarding time frame for completion a Syndication deal successfully;
5. Bangladesh Institute of bank Management (BIBM) also can play vital role to arrange training
program on loan Syndication (it is on going process) in the country and by taking steps sending
officials/executives in abroad also.

29. THANK YOU ALL