Syndicated Loans


Syndicated Loans

The Middle East Bank, in response to the needs for facilities beyond the limits of amounts set by the Central Bank, is ready to conclude syndicated loan agreements with other banks to cooperate in financing manufacturers and industrialists for new and expansion projects.

Loan syndication is a mode of finance through partnership of several financial institutions, where the loans are granted through contracts such as partnership, instalment sale, hire purchase (HP) , futures/forward contracts and/or taking on commitments by issuing L/C and guarantees according to the contractual arrangements and applicant's terms and conditions. Such loans are mainly extended when the requests for funds exceed the major loan limits and commitments of the bank or when the purpose is to comply with credit policies to reduce the risks, arisen from facility extension and taking on commitments.

In this process, multiple banks, in cooperation with each other and designating one bank to act as the lead agent on the syndicated loan, extend the loan. This method overcomes the bank's capital insufficiency with regard to its general obligations and limits and distributes the risks of megaprojects among the banks. In the preliminary stage, the applicant visits the bank and negotiate on the requested finance, his capability to repay the loan and the interest rate. If the bank agrees to act as a lending party to the applicant, the same bank shall act as the leading bank (syndicate agent) in gathering  a set of information on the customer's credit status (legal and financial situation, applicant's cash flow analysis and a review of his risk rating and creditworthiness position), the purpose of the loan, terms and conditions of the loan (interest rate, maturity date, types of securities, drawdown and repayment terms and conditions and associated costs), feasibility study of the project,......and submits the same along with an invitation letter to prospective financial institutions which may contribute to lending.

Through negotiations and meetings between the leading bank and other prospective banks, interested in lending, the contribution of each bank to the syndicate is set. The syndicate members also designate one of the member banks as the agent bank and eventually the syndicated loan agreement is signed by the syndicate members. Now, the agent bank, in line with the loan syndication agreement, carries out the loan administrative issues (opening an account for the management of the loan proceeds, informing other syndicate members of the schedule for allocating the share/committed funds of each bank (out of total), carrying out official legal and procedural issues regarding securities and collaterals and management of the same, disbursement of the loan, collecting principal and interest from recipient and distribution of which among members, collecting fee charges, oversight on how the applicant carries out the contract, management, supervision and monitoring the use of funds and producing periodical reports for the members,....).