Create a 8 page essay paper that discusses Security for secured syndicated loans in an international context. ……. Analyse the different mechanisms which are generally used in the common law jurisdictions and the civil law jurisdictions to deal with the transfer of secured syndicated debt.
On the other hand, in the European market, the issuance is mainly done by private sponsors of equity due to its relatively low corporate activity.
Investment grade high quality companies are charged lesser fees for loans compared to the leveraged or speculative grade borrowers2. Leveraged borrowers carry credit profiles that are generally riskier and therefore end up paying higher fees for complex loans1. Under common law, trust structures offer security for the secure syndicated facilities. The security mechanism holds for various groups of lenders which mean there is no need for subsequent registration in case the lender changes. In other jurisdictions, especially where trusts may not be recognized, provisions of parallel debt are used under civil law. The parallel debt provisions achieve a similar purpose where the obligor of the debt acknowledges a separate and an independent debt to the trustee of the security for amounts that are equal to the ones specified in the financial documents of the debt thereof. Under parallel debt, the bank or a nominee of the bank acts as the security agent to administer security for each of the lenders and the finance parties. The agent, therefore, holds the benefit of the claim to the parallel debt as the property of the lenders and for the lenders’ benefits2.
The process of syndicating a loan is normally initiated by the borrower. The borrower appoints the lender by granting the party the mandate to act as the arranger. The arranger is responsible for advising the borrower on the suitability of the facility and the terms thereof. It is the arranger that determines a syndicate of banks that would provide the facility2. A lender of a syndicated loan may decide to transfer their commitment for a number of reasons.
The transfer may be necessitated by risk or portfolio management activities where the lender may consider its loan portfolio as being weighted with much emphasis put on a given type of
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