Bank syndicate

A bank syndicate (pool bancaire) is the group of banks that jointly finance a company under a single credit agreement, each for a share. In an acquisition financing, the lead bank studies the feasibility of the transaction and temporarily takes on the whole financing; the participating banks then take over part of it. The arranger organises the syndicate and sets the terms of the loan until signing. The agent then administers the loan: it manages the flows between the borrower and the lenders, passes on documents and negotiates the documentation on the lenders’ behalf. Decisions are taken by contractual majority; the loan template of the Euro PP Charter of October 2019 sets it at 66 2/3% of commitments. For a company renegotiating its debt, the syndicate brings together creditors with distinct interests: a bank that refuses a waiver blocks the decision when its share is needed for the majority. In conciliation, the conciliator deals with each syndicate member. In safeguard, the administrator classifies the syndicate members according to their security and rank. Refinancing a bank syndicate with a private debt fund or a small group of funds reduces the number of lenders to consult for a later waiver or amendment request.

A mid-sized company with €200m of revenue has a €120m syndicated loan shared among six banks. It requests a waiver of its leverage covenant. Four banks representing 70% of commitments accept. This percentage exceeds the 66 2/3% majority set in the agreement. The waiver binds all six banks.

• The decision majority set in the agreement and the decisions that require unanimity.
• The role of the agent, the borrower’s single point of contact after signing.
• The transfer clauses that allow a bank to leave the syndicate.
• The sharing of security between syndicate members and other creditors.