the law of multibank financing

THE LAW OF MULTI-BANK FINANCING

Syndicated Loans and the Secondary Loan Market

THE LAW OF MULTI-BANK FINANCING

Syndicated Loans and the Secondary Loan Market

Agasha MugashaLLB (Hons), DipLP, LLM PhD

Professor of Law, University of Essex

1

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vPREFACE

This book uses the designation multi-bank fi nancing to encompass different transactions where a group of banks acts in concert to provide credit to one bor-rower. It focuses on syndicated loans and the secondary loan practices of loan trading, credit derivatives, and collateralized debt obligations as practised in the London international fi nancial market and governed by English law. Over the years, many of the non-bank fi nancial institutions have joined this activity and this book notes that development.

The book is written to appeal to different legal audiences. The only assumption made by the author is that the reader is interested in the law as well as its context. There is also moderate coverage of some signifi cant law or practices encountered in other major jurisdictions. Chapter 6 is exclusively on US case law on loan par-ticipation and is included for useful analogies. The chapter sheds light on the US courts approach to bank documents and the reasons behind some of the contrac-tual provisions commonly encountered in such documents. While there is gener-ally more case law in the United States, however, reference to it is minimized in this book due to the different social and economic underpinnings.

Syndicated lending is quick, effi cient, and versatile. It results in the geographical and institutional sharing of credit and risk, thus delivering an internationally inte-grated fi nancial market. Innovations and expansion continue in syndicated loans, contributing to further development of the relevant law. The involvement of non-bank fi nancial institutions in this market has led to different methodologies in the lending markets as well as litigation. Most notably, there is increasing convergence of capital, loan, and equity markets in a trend that is set to continue. Loan markets routinely borrow techniques from bond and equity markets and vice versa.

The documentation of syndicated loans generally depends on market practice and the commercial terms of the deal at hand. Market practice largely derives from the conventions of the London market, which are generally shaped by fi nan-cial history in its past and modern forms. Considering the number and size of transactions in London alone, there is sparse case law that is directly on syndicated loans in particular, loan agreements in general, or indeed all multi-bank fi nancing transactions. For the most part, the practitioners apply general principles of law in developing the law and practice of multi-bank fi nancing. The courts, mostly by applying the Anglo-American classical notion of freedom of contract, have adopted an approach that facilitates the growth of trade and fi nancial structures

vi

and practices. They have therefore been proactive in developing multi-bank fi nancing and international banking in general by interpreting contractual docu-ments in a manner that generally conforms to market practice. The regulators have equally played their part by creating an enabling environment for the further growth of these transactions.

The fi nancial industry is dynamic, and so is the world economy. There is bound to be further growth in multi-bank fi nancing transactions and the law and regula-tions that govern them. Further developments to, and indeed alternative interpre-tations of, the views presented in this book, are therefore inevitable and healthy.

Agasha MugashaBrentwood, Essex

1 May 2007

Preface

vii

ACKNOWLEDGEMENTS

I am truly grateful to the multitude of individuals and institutions that assisted in different ways and made the publication of this book possible. A selection stands out and deserves special mention. None of them, however, is responsible for any errors in this book, for which I am solely responsible.

This book was written in the course of my employment and benefi ted from the study leave scheme in the Department of Law at the University of Essex. It also received signifi cant support in the form of direct funding from the British Academy and the UK Arts and Humanities Research Council (AHRC). The research also benefi ted from the generosity of Osgoode Hall Law School of York University in Canada, and the American University Washington College of Law in the United States, where I held short appointments as a visiting scholar in the course of writ-ing the book. I am grateful to these institutions as well as to my colleagues and the administrative staff there.

This book would be lacking some essential parts if the following individuals in the United Kingdom (and indirectly their organizations) had not been generous with information: Mark Campbell at Clifford Chance, Graham Penn at Sidley Austin, Richard Calnan at Norton Rose, Tom Price and Sally Moore at Markit, Petra Hofer at Dealogic, Daren Kemp at Sidley Austin, two anonymous reviewers com-missioned by OUP, and Caroline Checkley, the Law Librarian at the University of Essex. The Loan Markets Association also kindly gave me access to its two recom-mended forms of primary documents.

Outside the United Kingdom, the Loan Syndications and Trading Association in New York (through Elliott Ganz) was very generous at all times. I also obtained useful information from Michael Avidon in New York; Daniel Bradlow, Michael Swetye and Frank Byamugisha in Washington, DC; Clint Calder in Toronto; Edwin Kikonyogo, Jeff Midzuk, Eric Le Grange and Graeme Tucker in Johannesburg; Martin Bandeebire in Kampala; and my former Essex LLM stu-dents Atiq Imdad Ali, Subir Chakraborty, Lingzhi Fu, Gozde Hascelik, Lee Mason, Zhang Min, Henry Nampandu, Boseda Olofi nmakin, Aurelie Payet, Qian Qian Wang, Shujin Yang, and Li Zhe.

Professor Benjamin Geva introduced me to syndicated loans and his continuing support is priceless, together with that of Professors John F Dolan and Jean-Gabriel Castel; John C Lancaster, Pearl Rozenberg, Kevin McGuinness, William Kanyesigye, Betty and John Nganwa, Maude Bishop, and my South African

viii

friends and academic colleagues, Mr Justice Frans Malan, Jopie Pretorius, Angela Itzikowitz, Charl Hugo, and Sarel Du Toit.

I needed permission from McGill-Queens University Press, which permission was kindly given, for me to publish this book with Oxford University Press because the book is on a similar topic to my earlier book, The Law of Multi-bank Financing (Syndications and Participations), which was published in Canada in 1997. I pub-licly acknowledge my gratitude to McGill-Queens University Press. It bears emphasis, though, that the two books are very different in substance even though inevitably I do express the same ideas or occasionally use the same text.

Finally, I am truly grateful to my family and friends who have always been there for me and have thus contributed immeasurably to this work.

Agasha MugashaBrentwood, Essex

1 May 2007

Acknowledgements

ix

CONTENTSSUMMARY

Table of Cases xxvTable of Legislation xxviiTable of European Directives xliTable of International Treaties and Conventions xliiiList of Tables xlvList of Figures xlviList of Abbreviations xlvii

1. Multi-Bank Financing: What It is and is Not 1 2. Multi-Bank Financing: Who Uses It, Where, and Why? 61 3. Arranging Syndicated Loans, Sub-participations,

and Loan Participations 99 4. The Nature of Credit Facilities used in Syndicated

Loans and Secondary Loan Markets 175 5. Syndicated Loans: Legal Relationships Between

the Borrower and Lenders, and among Syndicate Lenders 203 6. Loan Participations: Legal Relationships Between

the Lead Bank and Participants, Participants and Borrower, and Among Participants 271

7. Loan Sub-participations: Legal Relationships Between the Lead Bank and Sub-participant, and Borrower and Sub-participant 341

8. The Secondary Market for Syndicated Loans: Loan Trading, Credit Derivatives, and Collateralized Debt Obligations 353

9. The Agent Bank in Syndicated Loans and Loan Participations 403

10. Syndicated Loans and Borrower Insolvency: Winding-up and Workout Procedures 439

11. The Regulation of Syndicated Loans and the Secondary Loan Market Practices 471

12. Conclusion 513

xAppendix 1: Multicurrency Term Facility Agreement (Miranda Projects/The Prospero Group/Ariel Bank Ltd) 527

Appendix 2: LSTA Sample Par/Near Par Participation Agreement 585Appendix 3: LSTA Purchase and Sale Agreement for Distressed Trades 596Appendix 4: LSTA Assignment and Assumption 622Appendix 5: LSTA Model Transfer Provision 627

Index 631

ContentsSummary

xi

CONTENTS

Table of Cases xxvTable of Legislation xxviiTable of European Directives xliTable of International Treaties and Conventions xliiiList of Tables xlvList of Figures xlviList of Abbreviations xlvii

1. Multi-Bank Financing: What It is and is Not

I. Introduction 1.01

II. The Dynamism of Multi-Bank Financing 1.05A. Increasing Sophistication of Client Needs 1.06B. Impact of Economic Cycles 1.07C. Different Types of Financial Institutions and Methods 1.08D. Impact of Changing Regulations 1.09

III. Designation of Multi-Bank Financing 1.10A. Increasing Participation of Other Financial Institutions 1.13

IV. Description of Multi-Bank Financing Transactions 1.14A. Primary Transactions 1.15

1. The Syndicated Loan 1.15a. Common varieties of syndicated loans 1.17b. Niche-market syndicated loans 1.26

2. Club Deal Loans 1.31B. Secondary Loan Market Practices 1.35

1. Loan Participation and Loan Sub-participation: Early Differences between New York and London Practices 1.37

2. Loan Sub-participations 1.383. Loan Participations 1.40

a. General description 1.40b. Differentiation between types of loan participation 1.41

4. Transferable Loan Facilitiesa Historical Note 1.50a. Transferable loan certifi cates 1.51b. Transferable loan instruments 1.52c. Current practices 1.53

5. Loan Trading 1.546. Credit Derivatives 1.557. Collateralized Debt Obligations 1.58

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V. Multi-Bank Financing Contrasted with Similar Financing Techniques 1.61A. Introduction 1.61B. Multi-Bank Financing Contrasted with Equity

Syndications and Participations 1.63C. Multi-Bank Financing Contrasted with Capital

Market Methods 1.64D. Multi-Bank Financing Contrasted with International

Bonds/Eurobonds 1.65E. Multi-Bank Financing Contrasted with

Commercial Paper Programmes 1.68F. Multi-Bank Financing Contrasted with Securitization 1.70

1. Traditional Sale Structure 1.722. Sale of Assets to a Trustee of a Receivables Trust 1.73

VI. Conclusion 1.76

2. Multi-Bank Financing: Who Uses It, Where, and Why?


II. The PartiesWho Uses Multi-Bank Financing? 2.02A. The Borrowers 2.02

1. Who are the Borrowers? 2.022. Regulation of the Borrowers 2.06

B. The Lenders and Investors 2.071. Banks 2.08

a. Different types of banks 2.08b. Regulation of banks 2.12

2. Non-Bank Financial Institutions 2.15a. Hedge funds 2.16b. Pension funds 2.19c. Insurance companies 2.20d. Collateralized debt obligations 2.21e. Building societies 2.22f. Equity funds 2.23g. Mutual funds and prime rate funds 2.24h. Finance companies 2.25i. Islamic fi nance 2.26j. Vulture funds 2.27k. International Finance Corporation 2.28l. Credit unions (cooperative credit associations) 2.29

III. Components of the Financial MarketWhere Multi-Bank Financing Occurs 2.30A. Domestic Market 2.31B. Foreign Market 2.32

Contents

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C. International Financial Marketthe Euromarket 2.331. The Concept and Origins of the Eurocurrency 2.342. The Development of the Eurodollar Market 2.353. Characteristics and Advantages of the Euromarket 2.36

a. Regional markets 2.38

IV. The RationaleWhy Parties Use Multi-Bank Financing 2.39A. The Borrower 2.40

1. Advantages of Syndicated Loans 2.402. Advantages of Loan Trading and Other

Secondary Loan Market Methods 2.43B. The Banks 2.44

1. Advantages of Syndicated Loans 2.45a. The diversifi cation of the risk of non-payment 2.46b. Complying with regulations 2.47c. Earning arrangement fees 2.48d. Increasing prestige and publicity 2.49e. Developing profi table relationships 2.50

2. Reasons for Secondary Loan Market Practices 2.51a. Note on credit derivatives 2.52b. Sale considerations 2.53c. Purchase considerations 2.62

V. Conclusion 2.68

3. Arranging Syndicated Loans, Sub-participations, and Loan Participations


II. Arranging Syndicated Loans 3.03A. Procedure in Brief 3.03

1. Key Roles 3.062. Effect of Electronization on Documentation 3.103. Self-arranged Syndicated Loans 3.11

B. Detailed Procedure 3.141. Originating the Loan 3.14

a. The offer and the mandate 3.16b. Types of offer 3.17c. Legal effect of the mandate 3.25d. Arrangers potential liability to the borrower 3.40

2. Negotiating the Loan 3.483. Marketing the Loan 3.50

a. Finalizing the syndicate group 3.52b. Preparing the information package or memorandum 3.53c. Dealing with professional advisers 3.56d. Liability for inaccurate or erroneous information 3.57

4. Action in Contract or Tort? 3.635. Arrangers Potential Liability to the Participants 3.64

Contents

xiv

6. Misrepresentation 3.67a. Effective misrepresentation 3.68b. Materiality 3.71c. Inducement and reliance 3.72

7. Heads of ActionSpecifi c Categories of Misrepresentation 3.76a. Fraudulent misrepresentation 3.77b. Negligent misrepresentation 3.80c. Innocent misrepresentation 3.100d. Statutory misrepresentation 3.102e. Overseas statutory regimes 3.113

8. Negligence 3.114 9. Breach of Fiduciary Duty 3.11510. Obviating Liability for Misinformation or Non-information 3.132

a. Exemption or disclaimer clauses 3.132b. Due diligence 3.139c. Involving the participants 3.140d. Indemnity from the borrower 3.141

III. Arranging Loan Participations and Sub-participations 3.142A. Arranging a Loan Sub-Participation 3.142B. Loan Participation Procedures 3.143C. Liability Arising from the Selling Process 3.147

IV. Conclusion 3.148

4. Nature of Credit Facilities Used in Syndicated Loans and Secondary Loan Markets


II. Direct Loans 4.03A. Money Loans 4.04B. Overdraft Facilities 4.07

III. Documentary Credits 4.09A. Overview of Letters of Credit 4.09B. Syndications of Documentary Credits 4.11

1. One Bank Issues a Documentary Credit for its Own Account 4.13

2. One Bank Issues a Documentary Credit on behalf of the Syndicate 4.14

3. Each Bank Issues its Own Documentary Credit 4.15C. Participations of Documentary Credits 4.17

1. Introduction 4.172. Participations Granted by the Issuing Bank 4.213. Participations Granted by the Confi rming Bank 4.234. Participations Granted by the Nominated Bank 4.26

Contents

xv

IV. Bank Guarantees and Standby Letters of Credit 4.29A. Introduction 4.29B. Syndications of Bank Guarantees 4.33

1. Motives Behind Syndications of Bank Guarantees 4.332. The Syndication Procedure 4.343. Specifi c Types And Purposes of Bank Guarantees 4.38

a. Tender guarantee 4.39b. Advance payment or repayment guarantee 4.40c. Performance guarantee 4.41

C. Syndications of Direct Pay Standby Letters of Credit 4.45D. Participations of Bank Guarantees and Standby Credits 4.47

V. Bankers Acceptances 4.51A. Bankers Acceptances as a Funding Facility 4.51B. Syndications of Bankers Acceptances 4.56C. Participations in Bankers Acceptances 4.58

1. Risk Participations 4.592. Generic Participations 4.603. Observations 4.62

VI. Conclusion 4.64

5. Syndicated Loans: Legal Relationships Between the Borrower and Lenders, and among Syndicate Lenders


II. The Legal Nature of the Syndication Arrangement 5.06A. Importance of Determining the Legal Nature 5.06B. Legal Nature of the Syndication Arrangement 5.07

1. Separate Loans 5.082. Joint Tenancy or Joint Venture 5.143. Partnership 5.15

III. Contractual Provisions in a Syndicated Loan Agreement 5.16A. Key Determinants of Loan Classifi cations and Terminology 5.19B. Key Features of Euroloan Lending 5.20

1. The Concept of Matched Funding 5.202. The Concept of Net Lending (Yield Protection) 5.21

C. Legal Relations between the Lenders and the Borrower 5.231. Defi nitions 5.242. The Facility 5.253. Purpose and Utilization of the Facility 5.264. Payments, Repayment and Prepayment 5.28

a. Payment of interest 5.29b. Repayment of principal 5.35c. Prepayment and cancellation 5.37

Contents

xvi

d. Payment of fees, costs, and expenses 5.41e. Payment of taxes 5.42

5. Security, Guarantees, and Insurance 5.43a. Security 5.43b. Guarantees, indemnity, and support arrangements 5.47c. Insurance 5.51

6. Conditions Precedent 5.52 7. Representations and Warranties 5.56

a. Pari passu 5.58b. Material adverse change clause 5.60

8. Undertakings 5.63a. Informational undertakings 5.64b. Financial covenants 5.65c. General undertakings 5.69

9. Amendments, Waivers, and Consents 5.7010. Default 5.75

a. Events of default 5.76b. Problems with cross-default clauses 5.79c. Consequences of default 5.83

11. Change of Parties and Transfers of Loan Interests 5.94a. Methods of transferring loan interests 5.95b. Conditions of assignment or transfer 5.96c. Change of lenders 5.97

12. Governing Law, Jurisdiction, and Service of Process 5.9913. Legal Opinions 5.10314. Miscellaneous Provisions 5.105

D. Legal Relationships Among the Lenders 5.1061. Sharing Payments 5.106

a. The Iranian crisis 5.109b. The Argentinian crisis 5.110c. Sovereign debt-restructuring 5.112d. Double-dipping 5.113e. Cross-jurisdictional and cross-currency set-off 5.114f. Other aspects 5.115

2. Majority Voting 5.116E. Legal Relationships Between the Lenders and the Agent Bank 5.124


6. Loan Participations: Legal Relationships Between the Lead Bank and Participants, Participants and Borrower, and Among Participants


Contents

xvii

II. Lead Bank and Participant Relationship 6.08A. The Legal Nature of the Participation Arrangement 6.10

1. Analysis 6.12a. Sale theory: assignor-assignee relationship 6.13b. Debt theory: creditor-debtor relationship 6.21c. Ownership in common or tenancy in common 6.26d. Partnership or joint venture 6.27e. Trust 6.32f. Agency 6.37

B. Economic Consequences of Characterization 6.411. Borrowers Insolvency 6.42

a. Set-off by the lead bank 6.43b. Set-off by the participant 6.46c. Entitlement to collateral and other collections 6.49

2. Lead Banks Insolvency 6.51a. Set-off by the borrower 6.52b. Set-off and other claims by the participant 6.53

3. Participants Insolvency 6.68C. Form of the Participation Agreement 6.74

1. Oral Participation Agreements 6.742. Written Participation Agreements 6.76

a. Conclusion of the contract 6.79b. Precedence of documents 6.80c. Admissibility of extrinsic evidence 6.82

D. Contents of the Participation Agreement: Contractual Rights and Duties 6.871. Credit Information 6.91

a. Allocation of the credit risk 6.942. Initial and Subsequent Funding 6.95

a. Initial funding 6.96b. Subsequent funding 6.97c. Failure to fund the loan 6.98

3. Receipts, Collections, and Expenses 6.99a. Lead banks duty to collect the loan 6.100b. Sharing and appropriation of collections 6.102c. Apportionment of costs and expenses 6.104

4. Servicing the Loan 6.108a. The servicing function 6.108b. Termination of servicing 6.110

5. Modifi cations and Waiver 6.1116. Default and Enforcement 6.1157. Risks and Standard of Care 6.1208. Assignment of the Loan 6.1229. Representations and Warranties 6.125

a. Conditions precedent 6.127

Contents

xviii

10. Breach and Non-Performance 6.128a. Elevation 6.129b. Subrogation 6.130

11. Miscellaneous Provisions 6.13112. Implied Terms 6.132

a. Presumptions about participation agreements 6.133b. Fiduciary obligations 6.135c. Duty of good faith and fair dealing 6.136d. Duty to use reasonable care 6.140e. Observations 6.141

III. Participant-Borrower Relationship 6.142

IV. Participant-Participant Relationship 6.144

V. Conclusion 6.152

7. Loan Sub-participations: Legal Relationships Between the Lead Bank and Sub-participant, and Borrower and Sub-participant

I. Introduction 7.01A. Description of Sub-participation 7.03

1. Funded Sub-participation 7.042. Risk Sub-participation 7.05

II. Legal Relationships in Sub-participation Arrangement 7.06A. Legal Nature of a Sub-participation Arrangement 7.06

1. The Lead BankSub-participant Relationship 7.062. The Sub-participant and the Borrower 7.10

B. The Sub-participation Agreement 7.111. Form of the Agreement 7.112. Delivery of Documents 7.123. Confi dentiality 7.134. Payment of the Sub-participation 7.145. Distributions 7.15

a. Distributions in cash 7.16b. Distributions not in cash 7.17c. Shortfall in distributions of interest or fees 7.18d. Contingent receipt of payment 7.19

6. Representations and Warranties 7.20a. Representations and warranties by the lead bank

and sub-participant 7.20b. Representations and warranties by the lead bank 7.21c. Exclusion of warranties and representations 7.22

7. Confi rmations by the Sub-participant 7.238. Undertakings by the Lead Bank 7.249. Administration of the Sub-participation 7.25

Contents

xix

10. Indemnities 7.2611. Transfers 7.2712. Governing Law 7.2813. Jurisdiction 7.2914. Other provisions 7.30

8. The Secondary Market For Syndicated Loans: Loan Trading, Credit Derivatives, and Collateralized Debt Obligations


II. Loan Trading 8.03A. Past Obstacles to Loan Trading 8.04B. The Legal Framework for Loan Trading 8.06

1. Methods of Transferring Property InterestsCommon Law Principles 8.12a. Novation 8.12b. Assignment 8.16c. Declaration of trust 8.34d. Charges 8.42

C. Reasons for Loan Trading 8.44D. Development of the Systems for Loan Trading 8.45

1. Objective Pricing 8.462. Loan Rating 8.473. Loan Identifi cation 8.484. Industry Body Support 8.495. Financial Institution Involvement 8.506. Use of the Internet 8.51

E. Legal and Regulatory Issues 8.541. Loan Trading Contractsthe Courts Approach 8.532. Transfer of Loan Interests 8.553. Transfer in Breach of Express ProhibitionRequirement

for Consent 8.564. Confi dentiality 8.575. Set-off 8.586. Prudential Concerns 8.59

III. Credit Derivatives 8.60A. Description of Credit Derivatives 8.60B. Advantages of Credit Derivatives 8.61C. Types of Credit Derivatives 8.63

1. Credit Default Swap 8.642. CDS Squared 8.673. Total Return Swap and Total Rate of Return Swap 8.684. Credit Linked Note 8.715. Repackaged Note 8.73

Contents

xx

D. Legal and Regulatory Issues 8.741. Legal Issues 8.74

a. Mis-selling of products 8.75b. Enforceability and interpretation of the contractual

documents 8.76c. Transfer of property interests 8.79

2. Regulatory Issues 8.80a. Provisioning for operational risk 8.80b. Are credit derivatives insurance business or insurance

contracts? 8.82c. Is a credit derivative a gaming or wagering contract? 8.85

IV. Collateralized Debt Obligations 8.86A. A Description of CDOs 8.86B. Why CDOs are Appealing 8.87C. Types of CDOs 8.88

1. Underlying Assets 8.892. Arbitrage versus Balance Sheet CDOs 8.903. Cash versus Synthetic CDOs 8.934. Static versus Managed CDOs 8.975. Cashfl ow versus Market Value CDOs 8.99

D. Legal Issues 8.1011. Jurisdiction of the SPV 8.1012. Transfer of Assets 8.102

a. Effective transfer 8.102b. True sale opinions 8.103c. Consent requirements 8.104

3. Set-off 8.1054. Lender Liability 8.106

V. Conclusion 8.107

9. The Agent Bank in Syndicated Loans and Loan Participations


II. General Approach to the Agent Banks Legal Status and Functions 9.04A. True Agent or Special Agent Debate 9.06

1. Agent Bank as a True Agent 9.07a. True agent with fi duciary duties 9.07b. True agent disclaiming fi duciary duties 9.08

2. Agent Bank as a Special Agent 9.09B. Analysis 9.10

1. Meaning of the Word Agent 9.112. The Duties of the Agent Bank 9.12

Contents

xxi

3. The Authority of the Agent Bank 9.144. Observations 9.15

III. Contents of the Agency Clause 9.17A. General Principles of Law 9.17

1. Duty to Exercise Due Care and Skill 9.182. Implied DutiesFiduciary Duties 9.193. Authority of the Agent Bank 9.23

a. Express actual authority 9.27b. Implied actual authority 9.28

B. Specifi c Aspects of the Agency Clause 9.321. Appointment and Authorization 9.33

a. Irrevocability of the appointment 9.35b. Delegation to the agent bank 9.36

2. Duties of the Agent Bank 9.38a. Checking that the conditions precedent

have been satisfi ed 9.41b. Receiving utilization requests 9.42c. Administering interest periods 9.43d. Administering interest rates and mandatory costs 9.44e. Dealing with market disruption events 9.45f. Administering foreign exchange transactions

and multi-currency facilities 9.47g. Calculating limits for availability, tranches,

fronting banks, and swinglines 9.48h. Calculating and requesting fees and general expenses 9.49i. Acting as a conduit for information 9.50j. Monitoring fi nancial covenants 9.51k. Acting as a conduit for payments 9.52l. Checking certain types of information 9.53m. Transfers of lenders commitments

and changes to borrowers and guarantors 9.54n. Waivers, amendments, and consent 9.55o. Handling events of default and organizing banking

meetings 9.563. Protections Given to the Agent Bank 9.584. Confl ict of Interests 9.635. Additional Remuneration 9.656. Use of Confi dential Information 9.667. Reimbursement and Indemnifi cation of the Agent 9.678. Termination and Replacement of the Agent Bank 9.69

IV. Conclusion 9.72

Contents

xxii

10. Syndicated Loans and Borrower Insolvency: Winding-up and Workout Procedures

I. Introduction 10.01A. Practical Considerations Concerning Insolvency Procedures 10.05B. Meaning of Insolvency 10.11

1. Commercial Insolvency 10.122. Balance-sheet Insolvency Test 10.13

II. Formal Statutory Insolvency Proceedings 10.15A. Winding-up or Liquidation 10.16

1. Winding-up by the Court 10.172. Voluntary Winding-upa Brief Note 10.183. Legal Consequences of Winding-up on Syndicated Loans 10.19

a. Capacity to conduct winding-up proceedings 10.20b. Legal proceedings and enforcement of claims 10.21c. Disposition of property 10.22d. Completion of the agreement 10.23e. Obligations of the borrower 10.24f. The companys business 10.25g. Managementappointment of the liquidator 10.26h. Distribution of assets 10.27

B. Administrative ReceivershipLimited Application 10.29

III. Rescue and Restructuring Methods and Procedures 10.33A. A Brief Comparison of English and US Law Procedures 10.35B. Administration 10.36

1. Commencement of Administration 10.392. Basic Mechanics of Administration 10.403. Consequences of Administration Relevant

to Syndicated Loans 10.41C. Company Voluntary Arrangement 10.43

1. The Company Voluntary Arrangement Process 10.462. Small Companiesa Note 10.53

D. The London Approach 10.551. Main Features of the London Approach 10.56

a. Information gathering 10.57b. The standstill period 10.58c. Interbank issues 10.59d. Financial support 10.61e. Subsequent developments 10.62


Contents

xxiii

11. The Regulation of Syndicated Loans and the Secondary Loan Market Practices


II. Regulation of Capital Adequacy 11.02A. Introducing Basel II 11.02B. Three Approaches to Measuring Credit Risk 11.08

1. Standardized Approach 11.092. Internal Ratings-based ApproachesFoundation

and Advanced 11.10C. Calculation of Minimum Capital Requirements 11.12

1. Regulatory Capital 11.132. Risk Weighting 11.14

a. Claims on sovereigns 11.16b. Claims on banks 11.17c. Claims on securities fi rms 11.18d. Claims on corporates 11.19e. Higher risk categories 11.20f. Off-balance sheet items 11.21

3. Credit Risk Mitigation 11.22a. Collateralized transactions 11.23b. On-balance sheet netting 11.24c. Guarantees and credit derivatives 11.25

4. Securitization Framework 11.26D. Regulating Capital Adequacy in the United Kingdom

Implementation of Basel II 11.281. Exposure Reclassifi cation 11.312. Asset Management TechniquesGenerally 11.33

a. Transfer of loan assets 11.34b. Novation 11.36c. Assignment 11.37d. Declaration of trust 11.38e. Sub-participation 11.39f. Undrawn commitments 11.40

3. Commitments to Lend 11.414. Credit Risk Mitigation Techniques 11.42

a. Financial collateral 11.43b. Non-Financial collateral 11.44c. Guarantees and credit derivatives 11.45d. Netting of fi nancial obligations 11.46

III. Regulation of Large Loan Exposures 11.49

IV. Regulation of Debentures 11.51

Contents

xxiv

V. Prohibition of Market Abuse 11.52A. Syndications Practice Generally 11.55B. Secondary Loan Trading 11.57C. Securitization 11.58

VI. Environmental and Social Regulation 11.60A. The Equator Principles 11.61

1. Description 11.612. Background to the Equator Principles 11.653. The Content of the Equator Principles 11.71

a. Preamble 11.72b. Scope 11.74c. Statement of principles 11.76d. Action planenvironmental management system 11.80e. Financial institution reporting and independent

monitoring 11.85B. An Early Critique of the Equator Principles 11.86

VII. Conclusion 11.89

12. Conclusion

I. Introduction 12.01A. Summary 12.04B. Law and Regulation 12.08

II. Future Directions 12.16A. General 12.16B. The Conceptual-Functional Approach to

Multi-Bank Financing 12.18C. Standardization and Harmonization for Syndicated Loans

and Secondary Loan Market Practices 12.21

Appendix 1: Multicurrency Term Facility Agreement (Miranda Projects/The Prospero Group/Ariel Bank Ltd) 527

Appendix 2: LSTA Sample Par/Near Par Participation Agreement 585Appendix 3: LSTA Purchase and Sale Agreement for Distressed Trades 596Appendix 4: LSTA Assignment and Assumption 622Appendix 5: LSTA Model Transfer Provision 627

Index 631

Contents

11

MULTI-BANK FINANCING: WHAT IT IS AND IS NOT

I. Introduction 1.01 II. The Dynamism of Multi-Bank

Financing 1.05A. Increasing Sophistication of

Client Needs 1.06B. Impact of Economic Cycles 1.07C. Different Types of Financial

Institutions and Methods 1.08D. Impact of Changing Regulations 1.09

III. Designation of Multi-Bank Financing 1.10A. Increasing Participation of Other

Financial Institutions 1.13

IV. Description of Multi-Bank Financing Transactions 1.14A. Primary Transactions 1.15

1. The Syndicated Loan 1.15a. Common varieties of

syndicated loans 1.17b. Niche-market syndicated

loans 1.262. Club Deal Loans 1.31

B. Secondary Loan Market Practices 1.351. Loan Participation and Loan

Sub-participation: Early Differences between New York and London Practices 1.37

2. Loan Sub-participations 1.383. Loan Participations 1.40

a. General description 1.40b. Differentiation between

types of loan participation 1.41

4. Transferable Loan Facilities a Historical Note 1.50a. Transferable loan

certifi cates 1.51b. Transferable loan

instruments 1.52c. Current practices 1.53

5. Loan Trading 1.546. Credit Derivatives 1.557. Collateralized Debt

Obligations 1.58

V. Multi-Bank Financing Contrasted with Similar Financing Techniques 1.61A. Introduction 1.61B. Multi-Bank Financing Contrasted

with Equity Syndications and Participations 1.63

C. Multi-Bank Financing Contrasted with Capital Market Methods 1.64

D. Multi-Bank Financing Contrasted with International Bonds/Eurobonds 1.65

E. Multi-Bank Financing Contrasted with Commercial Paper Programmes 1.68

F. Multi-Bank Financing Contrasted with Securitization 1.701. Traditional Sale Structure 1.722. Sale of Assets to a Trustee of a

Receivables Trust 1.73

VI. Conclusion 1.76

Multi-Bank Financing: What It is and is Not

2

I. Introduction

This introductory chapter describes the different types and phases of multi-bank fi nancing and distinguishes multi-bank fi nancing from similar transactions. These initial remarks are completed in chapter 2, which describes who uses multi-bank fi nancing, where, and why.

Multi-bank fi nancing occurs when a number of banks act in concert to extend credit to a borrower. The combination of the banks is usually highly coordinated, but in some cases the banks act in loose associations that are linked only by the simultaneous extension of credit to a borrower. The two main phases of multi-bank fi nancing are the syndicated loan and secondary loan market practices. In a syndicated loan, several banks simultaneously make a loan to a borrower on the basis of a single set of loan documents. A mandated lead arranger (or simply the arranger) originates and puts together the loan; a bookrunner keeps the records and distributes the loan to the various lenders; an agent bank administers the loan; and the participants provide the funds. In a secondary loan market practice (there are different types), the banks interest in the loan is sold or otherwise transferred to other banks or fi nancial institutions. The common methods for doing this are the sub-participation, loan participation, loan trading, credit derivatives, and collateralized debt obligations. Viewed together, the two phases of multi-bank fi nancing comprise a group of related credit-and-risk-transfer techniques that permit the participants in the fi nancial markets to manage their credit and risk more precisely.

There is considerable diversity in the terminology used to refer to the key fi nancial practices discussed in this book. Some key wordssuch as syndication, arranger, participation, sub-participation, and participantare not terms of art. They are ordinary English words that may be used in different contexts to mean different things. This observation holds true both in the fi nancial community and in legal literature where the terms syndication, participation, and sub-participation are frequently used in their ordinary meaning, sometimes inter-changeably and at other times complementarily. Occasionally, too, the words are qualifi ed by adjectives or used interchangeably with others such as primary syn-dication, true syndication, simple syndicate, secondary syndication, direct or indirect participation, silent participation, and sub-participation. It is there-fore important for readers to pay particular regard to the substance of the fi nancial practices and also to be consistent with the labels used in any particular discus-sion. This book ascribes to the fi nancial practices it discusses the labels and mean-ing commonly attached to them in euroloan practices, as practiced principally in London in the United Kingdom. There is also some inevitable use of terminology from industry practices in New York because of the overlapping practices in the

1.01

1.02

1.03

3two leading international fi nancial centres of London and New York. In the last decade the major participants in the syndicated loans market have been develop-ing common terminology and standard practices and documents that are increas-ingly used by the leading industry players. These documents, particularly those made under the auspices of the Loan Markets Association (LMA) and Loan Syndication and Trading Association (LSTA), are fairly representative of current practice and are discussed in this book as such.

Table 1.1 below, illustrates the syndicated loans market by showing the state of the market in the three years up to the end of 2006. The diagram illustrates total amounts and the types of the leading fi nancial institutions involved.

II. The Dynamism of Multi-Bank Financing

Multi-bank fi nancing techniques continue to evolve. The factors behind the evo-lution have impacted on the legal documentation for the transactions and also explain some of the cases that have come before the courts. The modern practice of syndicated loans and secondary loan market practices can fairly be described as one where banks are trying to satisfy the increasingly sophisticated needs of their clients in a competitive environment that involves many different types of fi nan-cial institutions and against the background of a complex and demanding regula-tory environment. It is therefore appropriate to mention briefl y at this point some of the important drivers of modern practices. The remarks are further explained in chapter 2 and the remainder of the book.

A. Increasing Sophistication of Client Needs

Multi-bank fi nancing developed simultaneously as a domestic and international facility. The borrowers are usually large and sophisticated entities that are aware of, and have access to, other types of fi nancing as well. They would thus seek to obtain the cheapest source of funds and will switch lenders if necessary. Their needs are also varied and may simultaneously be domestic or international. Often the borrower is a conglomerate or holding company whose fi nancing needs require a combination of different fi nancing facilities. The consequence is that the lenders are continually adapting as they seek to accommodate varied and sophisticated clients. In some cases the borrowers have been known to specify the composition of the lending institutions or the size of the lending group. The borrowers also fre-quently have an eye to the bond market, and may borrow by way of syndicated loan as a bridge fi nancing to a later bond issue. There are thus many short-term loans in the region of twelve to eighteen months which the borrower expects to refi nance in the bond market, as well as loans with longer tenors.

The Dynamism of Multi-Bank Financing

1.04

1.05

1.06


4

Tab

le 1

.1 T

op le

nder

s for

glo

bal s

yndi

cate

d lo

ans,

200

420

06

2006

4 20

05

Ran

kLe

nder

Par

ent

Dea

l Val

ue ($

) (m

)N

o.%

shar

eR

ank

Lend

er P

aren

tD

eal V

alue

($) (

m)

No.

%sh

are

1JP

Mor

gan

261,

589.

781,

739

6.54

1JP

Mor

gan

215,

508.

871,

779

6.24

2C

itig

roup

211,

276.

311,

379

5.28

2C

itig

roup

178,

868.

061,

444

5.18

3B

anc

of A

mer

ica

178,

318.

951,

840

4.45

3B

anc

of A

mer

ica

147,

214.

931,

973

4.26

4D

euts

che

Ban

k12

9,91

6.50

718

3.25

4B

NP

Pari

bas

110,

242.

791,

393

3.19

5R

BS

128,

114.

8990

43.

205

Mit

subi

shi U

FJ F

inan

cial

G

roup

106,

509.

191,

931

3.08

6M

itsu

bish

i UFJ

Fin

anci

al

Gro

up11

5,56

4.89

2,10

42.

896

AB

N A

MR

O10

5,70

3.83

1,33

13.

06

7B

NP

Pari

bas

113,

925.

851,

214

2.85

7D

euts

che

Ban

k10

4,34

9.59

789

3.02

8B

arcl

ays C

apit

al10

1,97

3.13

643

2.55

8R

BS

97,3

71.9

398

22.

829

AB

N A

MR

O96

,574

.39

1,20

32.

419

Bar

clay

s Cap

ital

96,9

28.2

079

12.

8010

Wac

hovi

a89

,355

.93

1,20

12.

2310

HSB

C86

,093

.45

1,09

72.

4911

Miz

uho

88,3

03.4

91,

781

2.21

11C

alyo

n84

,069

.75

1,02

22.

4312

Cre

dit S

uiss

e84

,659

.81

523

2.11

12W

acho

via

79,3

89.9

81,

251

2.30

13C

alyo

n84

,218

.33

936

2.10

13C

redi

t Sui

sse

73,3

40.3

355

52.

1214

HSB

C76

,340

.42

877

1.91

14M

izuh

o72

,057

.25

1,68

32.

0815

Gol

dman

Sac

hs76

,185

.41

324

1.90

15SG

Cor

pora

te &

In

vest

men

t Ban

king

69,5

77.6

084

12.

01

16SG

Cor

pora

te &

In

vest

men

t Ban

king

65,1

24.4

173

41.

6316

Sum

itom

o M

itsu

i Ban

king

C

orp

59,4

50.5

01,

452

1.72

17Su

mit

omo

Mit

sui B

anki

ng

Cor

p61

,215

.37

1,52

31.

5317

ING

50,3

19.9

973

71.

46

18M

orga

n St

anle

y52

,375

.67

270

1.31

18U

BS

46,4

07.9

142

61.

3419

Scot

ia C

apit

al51

,215

.37

620

1.28

19N

ATIX

IS44

,650

.69

596

1.29

20U

BS

51,0

97.5

042

11.

2820

Scot

ia C

apit

al44

,336

.95

564

1.28

Su

btot

al2,

117,

346.

407,

879

52.9

0

Subt

otal

1,87

2,39

1.80

7,51

354

.17

To

tal

4,00

2,83

4.32

9,42

710

0.00

To

tal

3,45

6,33

0.03

8,64

910

0.00

5The Dynamism of Multi-Bank Financing

2004

To

tal

Ran

kLe

nder

Par

ent

Dea

l Val

ue ($

) (m

)N

o.%

shar

eR

ank

Lend

er P

aren

tD

eal V

alue

($) (

m)

No.

%sh

are

1JP

Mor

gan

17

9,57

4.79

1,74

16.

851

JP M

orga

n65

6,67

3.45

5,25

96.

522

Ban

c of

Am

eric

a

125,

291.

981,

893

4.78

2C

itig

roup

511,

958.

934,

105

5.08

3C

itig

roup

12

1,81

4.56

1,28

24.

653

Ban

c of

Am

eric

a45

0,82

5.87

5,70

64.

474

AB

N A

MR

O

91,

937.

011,

249

3.51

4D

euts

che

Ban

k31

9,90

6.42

2,29

23.

175

Deu

tsch

e B

ank

8

5,64

0.34

785

3.27

5B

NP

Pari

bas

309,

443.

703,

869

3.07

6B

NP

Pari

bas

8

5,27

5.06

1,26

23.

256

Mit

subi

shi U

FJ

Fina

ncia

l Gro

up30

3,14

3.70

5,49

43.

01

7M

itsu

bish

i UFJ

Fin

anci

al

Gro

up

81,

069.

631,

459

3.09

7R

BS

298,

201.

852,

737

2.96

8B

arcl

ays C

apit

al

78,

706.

3578

43.

008

AB

N A

MR

O29

4,21

5.23

3,78

32.

929

RB

S

72,

715.

0285

12.

789

Bar

clay

s Cap

ital

277,

607.

682,

218

2.75

10W

acho

via

6

9,37

2.60

1,19

62.

6510

Wac

hovi

a23

8,11

8.51

3,64

82.

3611

HSB

C

65,

721.

6793

32.

5111

Cal

yon

229,

937.

112,

831

2.28

12C

alyo

n

61,

632.

5587

32.

3512

HSB

C22

8,15

5.55

2,90

72.

2613

Cre

dit S

uiss

e

55,

985.

2256

32.

1413

Cre

dit S

uiss

e21

3,98

5.36

1,64

12.

1214

SG C

orpo

rate

& In

vest

men

t B

anki

ng

47,

732.

8868

81.

8214

Miz

uho

200,

282.

434,

291

1.99

15Su

mit

omo

Mit

sui B

anki

ng

Cor

p

44,

598.

111,

063

1.70

15SG

Cor

pora

te &

In

vest

men

t Ban

king

182,

434.

902,

263

1.81

16M

izuh

o

39,

921.

6882

71.

5216

Sum

itom

o M

itsu

i B

anki

ng C

orp

165,

263.

984,

038

1.64

17Sc

otia

Cap

ital

3

7,76

0.22

553

1.44

17G

oldm

an S

achs

144,

590.

2181

31.

4318

ING

3

7,14

5.55

691

1.42

18U

BS

134,

499.

591,

283

1.33

19U

BS

3

6,99

4.17

436

1.41

19Sc

otia

Cap

ital

133,

312.

541,

737

1.32

20N

ATIX

IS

34,

094.

7845

61.

3020

ING

131,

892.

642,

006

1.31

Su

btot

al1,

452,

984.

185,

847

55.4

5

Subt

otal

5,42

4,44

9.64

21,2

6853

.82

To

tal

2,62

0,18

5.85

6,71

610

0.00

To

tal

10,0

79,3

50.1

924

,792

100.

00

Sour

ce: D

ealo

gic


6

B. Impact of Economic Cycles

The usual economic cycles affect (1) the number of loan transactions, (2) the size of the loan facilities, (3) pricing for the loans, (4) default rates, and (5) institu-tional demand for secondary trading. A buoyant economy with low default rates encourages lenders to commit to large loans and more frequently, whereas a con-tracting economy usually results in a more cautious approach in the number of transactions and the terms on which the loans are made. A deteriorating economy with high default rates spurs the secondary market in distressed loans.

C. Different Types of Financial Institutions and Methods

The early syndicated loans were simple structures assembled exclusively or nearly so among banks. The transactions are no longer simple and they are no longer exclusive to banks. Nowadays other types of fi nancial institutions are actively involved and include collateralized loan obligations (CLOs), hedge funds, pension funds, and insurance companies to mention but a few1 Many of these institutions are by nature investors and not lenders and they bring with them different requirements and methods of operation. They also have different com-mitments to the business activity of lending and apply different criteria before they get involved. In the secondary loan markets, for example, the investors require loan interests to be rated and require credit risk to be packaged in a certain way before they can invest in it. This in turn impacts on the documentation for primary documents as well because syndicated loans are typically made in con-templation of a future transfer. Decades ago borrowers could tap funding either by way of syndicated loan, capital market borrowing, or equity fi nancing. To date, the three methods interact signifi cantly. Loan markets routinely borrow tech-niques from bond and equity markets and the funding was provided by different institutions. It is generally acknowledged that there is increasing convergence of the methods of syndicated loans and capital markets. This development has been enhanced by the increasing participation of non-bank fi nancial institutions in syndicated loans. However, the apparent convergence extends only to similarity in procedures and the ultimate economic benefi t. Each method remains intact in its own right, serves its original purpose, and coexists with the other two. The convergence of fi nancing methods and the participating institutions makes it clear that the traditional stance of regulation according to institution is no longer appropriate. The trend for regulation seems to focus on equality of treatment for the fi nancial institutions and securities concerned. This seeks to avoid regulatory

1 See ch 2 below.

1.07

1.08

7arbitrage and also reduces the likelihood of regional, jurisdictional, or industry concentrations of risk driven by regulatory considerations.

D. Impact of Changing Regulations

In the early days, banks syndicated loans either because they could not individu-ally raise the amount required by the borrower or because the banks wanted to diversify the risk of lending. These origins, while still important, are no longer the main drivers of multi-bank fi nancing. Globally and domestically there have been fairly continuous changes in the regulatory environment and this has a direct impact on the business of syndicated loans and related practices. Perhaps the most noteworthy regulatory measure that has directly affected syndicated loans and related practices is capital adequacy regulation. The fi rst capital adequacy regula-tions (Basel I)2 had a dramatic impact on the practice of syndicated loans by con-straining the overall size of the lending portfolios of individual leading international banks. The operative capital adequacy regulations (Basel II)3 refi ne the calculation of the capital required of individual banks by further distinguishing between different assets and types of risk. Again, the regulations are affecting the business of syndicated loans and related practices by differentiating between types of assets, which affects the choices that banks make. Other regulations that have had an impact on syndicated loans are those that place limits on large exposures, thus effectively putting a limit on how much a bank can lend to an individual bor-rower or group of related borrowers. Furthermore, the more liberal regulatory environment now permits different types of fi nancial institutions to participate in syndicated loans (previously some did not) which means the market is more liquid but also more demanding because different institutions specify different requirements.

III. Designation of Multi-Bank Financing

The label multi-bank is a misnomer for the range of activity and institutions covered in this book. Multi-bank fi nancing suggests that two or more banks together fi nance a borrower. However, many types of non-bank fi nancial institutions actively take part in these deals and the trend is set to continue. It is appropriate, therefore, to inquire why the narrower multi-bank label is suitable for practices that include institutions other than banks. The label multi-bank is

2 Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards (July 1988) as amended.

3 Basel Committee on Banking Supervision, International Convergence of Capital Measurement and Capital Standards, A Revised Framework (November 2005).

Designation of Multi-Bank Financing

1.09

1.10


8

justifi ed because it captures the practical reality that banks historically occupied and still occupy the pivotal role in syndicated loans and secondary loan market practices. Banks remain the primary source for corporations that wish to borrow by way of loans. Furthermore, commercial lending is the main business activity of banks as a group as contrasted to other fi nancial institutions, and most banks are primarily and regularly engaged in primary lending. In the practice of syndi-cated loans and secondary market practices, the banks occupy a central position because they are the main initiators of the transactions, they participate in greater numbers than any other type of fi nancial institution, and they frequently advance the largest portion of the value of the funds. While it is the case that the institu-tional investors in recent years do provide large amounts of capital in the primary and secondary markets that sometimes exceed those of banks, it is rare for a non-bank fi nancial institution to maintain an on-going leading role in a syndicated loan beyond the structuring of the loan. Banks set the agenda in this area, hence the label multi-bank fi nancing.4

In law, lending is one of the twin elements (the other one being the taking of deposits) that have consistently been recognized as the primary business of bank-ing.5 Even where the business of banking has not been decided with certainty, and it may be the case that it is no longer important to have such a defi nition,6 it is clear that banks spearhead the provision of commercial lending. The banks, as deposit taking institutions and custodians of national savings, are uniquely placed for general lending and the unrestricted making of commercial loans has, as a rule of practice, remained a core function of the banks. Extending credit generally in the primary markets has thus largely been in the domain of the banks.

Tables 1.2 to 1.7 below, illustrate the dominant position of the banks as book run-ners and mandated lead arrangers in the practice of syndicated loans globally, in Europe, the Middle East, and Africa (EMEA) and the United States. The tables should be read in conjunction with Table 1.1 above, which showed that the banks are also the leading providers of funds.

4 The term multi-lender would also be suitable, but it lacks the inherent protections and privi-leges the law confers on banks. For these see United Dominion Trust Ltd v Kirkwood [1966] 1 All ER 968, 975 (CA).

5 State Savings Bank of Victoria Commissioners v Permewan, Wright & Co Ltd (1915) 19 CLR 457; United Dominion Trust Ltd v Kirkwood (n 4 above) 975.

6 The operative terminology for regulatory purposes is credit institution because Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions defi nes a credit institution as an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account. In practical terms, banks are the most vis-ible credit institutions.

1.11

1.12

9Designation of Multi-Bank Financing

Tab

le 1

.2 T

op b

ook

runn

ers f

or g

loba

l syn

dica

ted

loan

s, 2

004

2006

2006

2005

Ran

kB

ookr

unne

r D

eal V

alue

($) (

m)

No.

%sh

are

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

1JP

Mor

gan

528,

777.

691,

051

13.2

11

JP M

orga

n49

1,74

8.75

1,03

714

.23

2C

itig

roup

377,

466.

2062

09.

432

Cit

igro

up41

7,93

4.36

723

12.0

93

Ban

c of

Am

eric

a35

7,33

3.73

1,14

98.

933

Ban

c of

Am

eric

a31

5,60

7.25

1,17

59.

134

RB

S14

4,22

4.96

263

3.6

4D

euts

che

Ban

k12

4,53

9.22

220

3.6

5D

euts

che

Ban

k13

3,51

3.17

219

3.34

5R

BS

116,

398.

4225

43.

376

BN

P Pa

riba

s12

5,78

5.13

397

3.14

6B

NP

Pari

bas

112,

106.

2941

33.

247

Bar

clay

s Cap

ital

124,

075.

2924

53.

17

Bar

clay

s Cap

ital

110,

112.

4626

23.

198

Wac

hovi

a11

5,23

2.84

430

2.88

8W

acho

via

99,8

60.5

643

32.

899

Cre

dit S

uiss

e97

,32

2.68

209

2.43

9A

BN

AM

RO

80,4

17.1

431

22.

3310

Cal

yon

72,2

19.4

021

81.

810

Cal

yon

77,4

78.8

823

22.

2411

Gol

dman

Sac

hs70

,459

.18

141

1.76

11M

izuh

o76

,668

.89

654

2.22

12M

izuh

o69

,062

.34

707

1.73

12SG

Cor

pora

te &

In

vest

men

t Ban

king

63,5

96.7

616

21.

84

13Su

mit

omo

Mit

sui

Ban

king

Cor

p68

,324

.34

648

1.71

13C

redi

t Sui

sse

62,5

43.2

517

51.

81

14A

BN

AM

RO

64,6

16.9

430

11.

6114

HSB

C59

,813

.55

207

1.73

15M

itsu

bish

i UFJ

Fi

nanc

ial G

roup

59,3

89.7

172

71.

4815

Sum

itom

o M

itsu

i Ban

king

C

orp

58,9

27.8

356

11.

7

16M

erri

ll Ly

nch

50,7

56.5

813

01.

2716

Gol

dman

Sac

hs54

,566

.64

100

1.58

17M

orga

n St

anle

y50

,469

.25

641.

2617

Mit

subi

shi U

FJ F

inan

cial

G

roup

47,8

94.7

855

61.

39

18SG

Cor

pora

te &

In

vest

men

t Ban

king

49,8

73.9

713

61.

2518

Lehm

an B

roth

ers

40,0

93.5

092

1.16

19D

resd

ner K

lein

wor

t46

,015

.10

911.

1519

Dre

sdne

r Kle

inw

ort

37,7

78.6

378

1.09

20H

SBC

44,1

15.9

014

21.

120

UB

S31

,892

.57

890.

92

Su

btot

al2,

649,

034.

386,

285

66.1

8

Subt

otal

2,47

9,97

9.76

5,98

271

.75

To

tal

4,00

2,83

4.32

9,42

710

0

Tota

l3,

456,

330.

038,

649

100


10

Tab

le 1

.2 (

cont

.)

2004

Tota

l

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

% sh

are

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

N

o.%

shar

e

1JP

Mor

gan

483,

357.

621,

059

18.4

51

JP M

orga

n1,

503,

884.

063,

147

14.9

22

Cit

igro

up31

2,08

3.05

669

11.9

12

Cit

igro

up1,

107,

483.

612,

012

10.9

93

Ban

c of

Am

eric

a30

8,26

7.11

1,14

111

.77

3B

anc

of A

mer

ica

981,

208.

093,

465

9.73

4B

arcl

ays C

apit

al10

0,62

3.10

253

3.84

4D

euts

che

Ban

k35

8,33

0.03

675

3.56

5D

euts

che

Ban

k10

0,27

7.64

236

3.83

5B

arcl

ays C

apit

al33

4,81

0.85

760

3.32

6W

acho

via

85,5

61.7

541

03.

276

RB

S31

5,02

1.96

697

3.13

7B

NP

Pari

bas

77,0

01.6

933

62.

947

BN

P Pa

riba

s31

4,89

3.11

1,14

63.

128

AB

N A

MR

O54

,935

.24

257

2.1

8W

acho

via

300,

655.

151,

273

2.98

9R

BS

54,3

98.5

818

02.

089

Cre

dit S

uiss

e21

0,69

2.94

540

2.09

10C

redi

t Sui

sse

50,8

27.0

115

61.

9410

AB

N A

MR

O19

9,96

9.32

870

1.98

11H

SBC

41,7

55.5

318

41.

5911

Cal

yon

190,

024.

3459

71.

8912

Cal

yon

40,3

26.0

514

71.

5412

Miz

uho

167,

485.

921,

467

1.66

13Su

mit

omo

Mit

sui

Ban

king

Cor

p38

,505

.90

381

1.47

13Su

mit

omo

Mit

sui

Ban

king

Cor

p16

5,75

8.07

1,59

01.

64

14SG

Cor

pora

te &

In

vest

men

t Ban

king

35,2

68.4

912

81.

3514

Gol

dman

Sac

hs15

0,71

1.11

317

1.5

15M

itsu

bish

i UFJ

Fi

nanc

ial G

roup

32,6

98.2

130

01.

2515

SG C

orpo

rate

& In

vest

men

t B

anki

ng14

8,73

9.23

426

1.48

16Le

hman

Bro

ther

s25

,912

.61

800.

9916

HSB

C14

5,68

4.98

533

1.45

17G

oldm

an S

achs

25,6

85.3

076

0.98

17M

itsu

bish

i UFJ

Fin

anci

al

Gro

up13

9,98

2.70

1,58

31.

39

18C

omm

erzb

ank

Gro

up23

,233

.87

970.

8918

Dre

sdne

r Kle

inw

ort

102,

522.

7222

71.

0219

Mer

rill

Lync

h22

,443

.92

630.

8619

Lehm

an B

roth

ers

101,

082.

5027

01

20M

izuh

o21

,754

.69

106

0.83

20M

erri

ll Ly

nch

95,7

41.0

127

20.

95

Su

btot

al1,

934,

917.

364,

743

73.8

5

Subt

otal

7,03

4,68

1.70

16,9

8869

.79

To

tal

2,62

0,18

5.85

6,71

610

0

Tota

l10

,079

,350

.19

24,7

9210

0

Sour

ce: D

ealo

gic.

11


Tab

le 1

.3 T

op b

ook

runn

ers f

or E

ME

A sy

ndic

ated

loan

s, 2

004

2006

2006

2005

Ran

kB

ookr

unne

r D

eal V

alue

($) (

m)

N

o.%

shar

eR

ank

Boo

krun

ner

Dea

l Val

ue ($

) (m

)

No.

%sh

are

1R

BS

101,

648.

3718

26.

841

Cit

igro

up12

3,39

4.51

205

8.65

2C

itig

roup

91,6

51.3

713

66.

162

RB

S98

,967

.66

185

6.94

3B

NP

Pari

bas

85,9

26.4

125

65.

783

BN

P Pa

riba

s89

,942

.38

283

6.31

4B

arcl

ays C

apit

al77

,959

.44

155

5.24

4B

arcl

ays C

apit

al77

,678

.08

175

5.45

5D

euts

che

Ban

k68

,977

.92

814.

645

Cal

yon

68,9

61.2

414

54.

836

Cal

yon

56,7

54.0

313

93.

826

JP M

orga

n66

,255

.71

854.

647

JP M

orga

n55

,736

.68

633.

757

Deu

tsch

e B

ank

66,2

45.9

395

4.64

8SG

Cor

pora

te &

In

vest

men

t Ban

king

46,0

41.6

311

33.

18

SG C

orpo

rate

&

Inve

stm

ent B

anki

ng59

,969

.98

136

4.2

9D

resd

ner K

lein

wor

t42

,794

.14

852.

889

AB

N A

MR

O51

,367

.70

933.

610

AB

N A

MR

O27

,416

.49

861.

8410

HSB

C48

,181

.43

122

3.38

11H

SBC

25,8

03.7

462

1.74

11D

resd

ner K

lein

wor

t37

,636

.96

772.

6412

Gol

dman

Sac

hs24

,527

.87

261.

6512

ING

21,8

10.1

797

1.53

13N

orde

a B

ank

AB

23,9

66.3

981

1.61

13N

orde

a B

ank

AB

21,6

83.2

473

1.52

14C

omm

erzb

ank

Gro

up22

,919

.61

871.

5414

Gol

dman

Sac

hs19

,791

.73

141.

3915

Mor

gan

Stan

ley

22,5

56.5

915

1.52

15C

omm

erzb

ank

Gro

up17

,657

.10

911.

2416

Ban

co S

anta

nder

Cen

tral

H

ispa

no S

A -

BSC

H19

,681

.22

331.

3216

Uni

Cre

dit G

roup

16,8

58.4

175

1.18

17C

redi

t Sui

sse

19,4

31.0

734

1.31

17M

orga

n St

anle

y16

,817

.13

121.

1818

ING

19,0

98.9

887

1.28

18U

BS

13,8

92.7

216

0.97

19U

niC

redi

t Gro

up16

,507

.43

791.

1119

Cre

dit S

uiss

e11

,708

.31

190.

8220

NAT

IXIS

16,5

01.6

177

1.11

20N

ATIX

IS11

,455

.93

590.

8

Su

btot

al86

5,90

0.98

1,27

358

.23

Su

btot

al94

0,27

6.30

1,29

965

.91

To

tal

1,48

7,11

4.84

2,15

710

0

Tota

l1,

426,

518.

652,

143

100


12

Tab

le 1

.3 (

cont

.)

2004

Tota

l

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

1B

arcl

ays C

apit

al70

,708

.36

171

7.43

1C

itig

roup

284,

193.

2050

07.

352

Cit

igro

up69

,147

.32

159

7.27

2R

BS

248,

253.

0752

06.

423

BN

P Pa

riba

s59

,296

.29

232

6.23

3B

NP

Pari

bas

235,

165.

0877

16.

084

Deu

tsch

e B

ank

52,3

87.6

994

5.5

4B

arcl

ays C

apit

al22

6,34

5.88

501

5.86

5JP

Mor

gan

51,8

80.7

072

5.45

5D

euts

che

Ban

k18

7,61

1.55

270

4.85

6R

BS

47,6

37.0

415

35.

016

JP M

orga

n17

3,87

3.10

220

4.5

7C

alyo

n35

,403

.10

873.

727

Cal

yon

161,

118.

3637

14.

178

AB

N A

MR

O35

,262

.61

104

3.71

8SG

Cor

pora

te &

In

vest

men

t Ban

king

137,

809.

1734

73.

57

9H

SBC

32,6

89.3

911

03.

439

AB

N A

MR

O11

4,04

6.81

283

2.95

10SG

Cor

pora

te &

In

vest

men

t Ban

king

31,7

97.5

698

3.34

10H

SBC

106,

674.

5529

42.

76

11C

omm

erzb

ank

Gro

up20

,537

.45

782.

1611

Dre

sdne

r Kle

inw

ort

98,6

05.0

221

82.

5512

Dre

sdne

r Kle

inw

ort

18,1

73.9

156

1.91

12C

omm

erzb

ank

Gro

up61

,114

.16

256

1.58

13U

niC

redi

t Gro

up15

,559

.95

651.

6313

Nor

dea

Ban

k A

B58

,653

.33

200

1.52

14Ll

oyds

TSB

14,9

53.0

146

1.57

14G

oldm

an S

achs

54,9

76.4

357

1.42

15N

orde

a B

ank

AB

13,0

03.7

146

1.37

15IN

G53

,569

.34

242

1.39

16IN

G12

,660

.20

581.

3316

Uni

Cre

dit G

roup

48,9

25.7

921

91.

2717

Mer

rill

Lync

h10

,887

.75

31.

1417

Mor

gan

Stan

ley

42,9

67.5

034

1.11

18G

oldm

an S

achs

10,6

56.8

317

1.12

18Ll

oyds

TSB

39,4

24.9

112

71.

0219

Inte

sa S

anpa

olo

8,69

7.95

310.

9119

Cre

dit S

uiss

e38

,199

.31

730.

9920

Ban

c of

Am

eric

a7,

967.

4923

0.84

20N

ATIX

IS34

,835

.09

176

0.9

Su

btot

al61

9,30

8.31

1,08

865

.07

Su

btot

al2,

406,

361.

643,

668

62.2

5

To

tal

951,

739.

111,

752

100

Tota

l3,

865,

372.

596,

052

100

Sour

ce: D

ealo

gic.

13


Tab

le 1

.4 T

op b

ook

runn

ers f

or U

S sy

ndic

ated

loan

s, 2

004

2006

2006

2005

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

1JP

Mor

gan

469,

219.

9697

124

.91

1JP

Mor

gan

419,

035.

7192

426

.68

2B

anc

of A

mer

ica

348,

456.

401,

119

18.5

2B

anc

of A

mer

ica

299,

065.

871,

113

19.0

43

Cit

igro

up25

6,97

2.87

383

13.6

43

Cit

igro

up26

2,48

8.00

395

16.7

14

Wac

hovi

a11

3,54

2.40

425

6.03

4W

acho

via

99,8

60.5

643

36.

365

Cre

dit S

uiss

e66

,714

.12

163

3.54

5D

euts

che

Ban

k56

,999

.72

117

3.63

6D

euts

che

Ban

k61

,945

.01

129

3.29

6C

redi

t Sui

sse

46,3

03.0

015

02.

957

Gol

dman

Sac

hs43

,936

.47

111

2.33

7G

oldm

an S

achs

32,1

66.7

483

2.05

8B

arcl

ays C

apit

al42

,347

.83

722.

258

Lehm

an B

roth

ers

31,0

71.4

582

1.98

9M

erri

ll Ly

nch

39,3

67.0

511

92.

099

Bar

clay

s Cap

ital

28,9

04.3

766

1.84

10R

BS

38,5

25.4

669

2.04

10W

ells

Far

go27

,622

.05

155

1.76

11PN

C B

ank

NA

32,4

50.9

017

61.

7211

AB

N A

MR

O20

,414

.61

165

1.3

12W

ells

Far

go32

,010

.03

209

1.7

12K

eyB

anc

Cap

ital

Mar

kets

19,7

05.2

413

81.

2513

UB

S28

,304

.00

841.

513

UB

S17

,911

.95

721.

1414

Lehm

an B

roth

ers

26,8

36.6

986

1.42

14G

E C

apit

al17

,279

.62

137

1.1

15B

NP

Pari

bas

26,1

91.4

764

1.39

15R

BS

16,4

80.3

766

1.05

16M

orga

n St

anle

y24

,477

.29

461.

316

SunT

rust

Ban

ks15

,270

.35

590.

9717

AB

N A

MR

O23

,369

.58

169

1.24

17B

NP

Pari

bas

15,0

74.3

963

0.96

18G

E C

apit

al23

,097

.74

192

1.23

18M

erri

ll Ly

nch

14,7

52.6

668

0.94

19K

eyB

anc

Cap

ital

Mar

kets

18,6

40.6

714

80.

9919

PNC

Ban

k N

A13

,052

.75

180

0.83

20B

ear S

tear

ns17

,088

.13

580.

9120

Mor

gan

Stan

ley

12,8

20.9

833

0.82

Su

btot

al1,

733,

494.

083,

618

92.0

1

Subt

otal

1,46

6,28

0.38

3,48

093

.36

To

tal

1,88

4,01

7.67

4,04

010

0

Tota

l1,

570,

499.

763,

793

100


14

Tab

le 1

.4 (

cont

.)

2004

Tota

l

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

%sh

are

Ran

kB

ookr

unne

rD

eal V

alue

($) (

m)

No.

% sh

are

1JP

Mor

gan

423,

811.

9295

630

.92

1JP

Mor

gan

1,31

2,06

7.58

2,85

127

.19

2B

anc

of A

mer

ica

296,

707.

771,

080

21.6

42

Ban

c of

Am

eric

a94

4,23

0.05

3,31

219

.57

3C

itig

roup

213,

551.

6538

615

.58

3C

itig

roup

733,

012.

511,

164

15.1

94

Wac

hovi

a85

,351

.75

408

6.23

4W

acho

via

298,

754.

711,

266

6.19

5D

euts

che

Ban

k46

,167

.37

134

3.37

5D

euts

che

Ban

k16

5,11

2.09

380

3.42

6C

redi

t Sui

sse

42,9

98.7

013

53.

146

Cre

dit S

uiss

e15

6,01

5.82

448

3.23

7B

arcl

ays C

apit

al24

,122

.93

581.

767

Bar

clay

s Cap

ital

95,3

75.1

319

61.

988

Lehm

an B

roth

ers

22,0

12.9

071

1.61

8G

oldm

an S

achs

91,0

36.2

125

61.

899

Wel

ls F

argo

19,5

56.1

915

51.

439

Lehm

an B

roth

ers

79,9

21.0

523

91.

6610

Gol

dman

Sac

hs14

,933

.00

621.

0910

Wel

ls F

argo

79,1

88.2

651

91.

6411

UB

S13

,956

.21

711.

0211

Mer

rill

Lync

h65

,385

.12

245

1.36

12B

ank

of N

ew Y

ork

12,6

58.4

866

0.92

12R

BS

60,9

87.7

815

91.

2613

BN

P Pa

riba

s11

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