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Syndicated loan information


A syndicated loan is one that is provided by a group of lenders and is structured, arranged, and administered by one or several commercial banks or investment banks known as lead arrangers.

The syndicated loan market is the dominant way for large corporations in the U.S. and Europe to receive loans from banks and other institutional financial capital providers. Financial law often regulates the industry. The U.S. market originated with the large leveraged buyout loans of the mid-1980s,[1]: 23  and Europe's market blossomed with the launch of the euro in 1999.

At the most basic level, arrangers serve the investment-banking role of raising investor funding for an issuer in need of capital. The issuer pays the arranger a fee for this service, and this fee increases with the complexity and risk factors of the loan. As a result, the most profitable loans are those to leveraged borrowers — issuers whose credit ratings are speculative grade and who are paying spreads (premiums or margins above the reference rate SOFR in the U.S., Euribor in Europe or another base rate) sufficient to attract the interest of non-bank term loan investors. Though, this threshold moves up and down depending on market conditions.

In the U.S., corporate borrowers and private equity sponsors fairly even-handedly drive debt issuance. Europe, however, has far less corporate activity and its issuance is dominated by private equity sponsors, who, in turn, determine many of the standards and practices of loan syndication.[1]: 36 

  1. ^ a b Taylor, Alison; Sansone, Alicia (2007). The Handbook of Loan Syndications & Trading. New York: McGraw-Hill. ISBN 978-0-07-146898-5.

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