Explain the role and legal responsibilities of the Arranger in the primary syndication process.
SECTION 1: ARRANGEMENT OF THE SYNDICATED LOAN
1) Initiate process of the syndicated loan
– Borrower initiates the process by an appointment with arranger.
Mandate letter where they agree basic terms and conditions of the loan, and identify obligations of the arranger.
Arranger wants to limit implied obligations. Ex: not is a legally binding offer in the mandate letter.
– Potential participants targeted by arranger and sent term sheets with details of borrower amount and type of loan, details of repayment, interest and prepayment…
– Borrower and arranger prepare information memorandum with annual financial statements for at least 3 years, management accounts, business plans…
Information memorandum subject to a confidentiality agreement.
2) Distinction between roles of the arranger and the agent
– Arranger acts on behalf of syndicate to negotiate loan documentation, so seeks to avoid onerous duties and obligations to the syndicate.
– So arranger`s duties: no conflict with interest of syndicate, no profit not received by syndicate, due care and skill in negotiating documents.
– Role of arranger complete following execution of loan agreement: when loan signed.
– Agent responsible for day-to-day management of the loan on behalf of syndicate since execution.
Functions of the agent: monitoring obligations, receive and distribute payments from the borrower.
SECTION 3: LEGAL CONCERS OF THE PARTIES TO THE SYNDICATED LOAN