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Lenders today are more focused than ever on the development of a full banking relationship with their customers. Materially increased regulatory costs and an extended period of low interest rates have made ancillary product and service revenue a big driver of credit extension decisions. The result is that fewer and fewer lenders are willing to be simply “buyers of paper” in the syndicated market and, in order to fill out their loan syndicates, borrowers must lean on existing relationships. When a non-relationship lender is needed, borrowers find that they must demonstrate the possibility of a full banking relationship, often tangibly and in advance of a commitment to the syndication!
In the past, we have discussed the complexity involved in deciding how to structure the syndication of a large loan in today’s lending environment. Whether it is fully underwritten transactions vs. best-efforts arrangements or single vs. multiple agent banks, each decision involves trade-offs that impact the optimal execution strategy for a given transaction. These solutions, however, pre-suppose that a traditional syndication is actually needed. In light of the earlier discussion, pre-2008 style underwritings have become increasingly rare and we have seen the impact on the best-efforts market of a growing reliance on relationship lenders. Increasingly, borrowers are asking themselves (and their agent banks) if there is an alternative syndication model that better reflects today’s “new reality.”
Simply put, borrowers want to know: Should I just “club” my deal and forgo a true agented syndication? The answer is that you should factor in all considerations concerning both your banking relationship strategy AND the contemplated transaction. Some questions to ask include:
Choosing a strategy
Given these considerations, what is the right strategy — a traditional agented syndication or a club? The best place to start answering these questions is with your PNC Real Estate relationship manager. He or she 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 United States and manages, as administrative agent, more than 650 syndicated loans 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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