When it comes to syndicated loans, one of the most frequently asked borrower questions is, How should I manage the composition of my lender group... starting with the agent? Prior to 2008, the answer was relatively simple. Borrowers would typically run a bidding process among a number of qualified banks and, upon awarding the deal, would engage the winning lender to act as their sole agent in underwriting (or arranging) the financing. The agent would be responsible for all aspects of the capital raise and, in many instances, the borrower would have relatively little direct involvement with its prospective lenders.
The disruption of the financial markets that occurred in 2008 reminded Agent banks of the very real risks involved in underwriting large loans caused borrowers to think deeply about the importance of managing both underwriting risk and lender relationships and made syndicating loans to more cautious participant banks feel, at times, like herding cats. What has resulted is a syndicated loan market with many more deals that are co-led between two (or sometimes more) Lead Arrangers than had been the practice pre-2008. Borrowers are also more actively managing lender relationships in order to balance relationship considerations, transaction costs and ease of execution.
What issues should a borrower consider when planning for a large syndicated loan?
Choosing a Strategy
Given these considerations, what is the right strategy - a single agent or a co-led deal? How many lenders should be involved? The best place to start answering these questions is with your PNC relationship manager. They can help you with preliminary questions and, when you're ready, will connect you with Loan Syndications specialists who will look more deeply at your needs. PNC is consistently ranked in the top five real estate loan syndication businesses in the U.S. and manages, as Administrative Agent, over 500 syndicated lending relationships totaling approximately $70 billion in commitments. We look forward to the opportunity to work with you on your next large loan.
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