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Abhisheikh Lahoti
Aditi Bodha
Amanpreet Kaur
Anchal Gupta
Anshul Gupta
Atul Akash
Group 6
Corporate Strategy for
Loan Syndication
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We look at long term funding options
Tame Africa :International Finance through an acquisition
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Financing Options Syndicated loan
African Safari : Brief Snapshot
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Why not Canons and Guns to tame Lions ?
Why loan Syndication
Bharti D/E 0.4 TO 1.2
SPV Near term balance sheet healthGuarantee Long term risk
3 G
Auction
Zain
Debt costly - 195 basis points above LIBOR
Equity Markets Not approving of move (10
time multiple of EBIDTA levels)
Flexibility Nigerian Assets regulation risk Loan syndication provided flexibility
RISK VERY HIGH Zain Financial
Paralysis
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Syndicate Loan Types
Loan Syndication :A weapon to tame wild African lions
Benefits
Syndicate Credit Agreements: more than one bank
Agree to provide a commonborrower
Credit facility on common terms &
conditions Governed by a Single Legal
Document
Factors Indicating CreditSyndicate Markets
Parties Involved
Pressure to rebuild Capital Positions Ensure Adequate Return on Assets
Bank Policies
Demand for Syndicate Term loans
Compared with alternative source offunding
Cost Comparisons
Term Loan Revolving Credit
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Process Benefits to Bharti
Banks
No 11 bilateral separate agreements required Loan facility, maturity Single set of terms and conditions
One comprehensiveCredit Document
Standby credit facilities Working capital requirements Project financing Term Loan with average maturity 4.7 yrs
Revolving Loan Facilities
Tailor made toBhartis
requirements
Combine various sources of financing with differentschedules and Repayment schedules and maturity levels
Competitive pricing: Interest rate negotiated at 195 bpsFlexible tool
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Process Benefits to Bankers
Options offered
Enhance andfortify relations
Cross-sell otheropportunities
11 out of 12banks acceptedthe syndication
offer
Risk sharing
Limit creditexposure
Limited exposurefor each bank tohighly leveraged
deal
Activesecondary
market
Options to sellfully or partiallythe loan
agreement
Banks can
offload, althoughat a loss whencredit rating of
Bharti fell
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The Options for Syndicated Loans
Bhartis choice
Term Loan Facility
A specified capital sum provided over a set period of time known as term
Borrower is allowed a short period after executing loan ( availability orcommitment period) during which time it can draw loan upto a specified maxlimit
AmortizingVs
Bullet Repayment
Once a term loan is repaid, it cannot be re-drawn
Revolving Loan Facility
Maximum aggregate amount of capital available over a specified period of time
Allows the borrower to drawdown, repay and re-draw loans advanced to it
Each loan borrowed for a specified period 1,3 or 6 months Repayment by scheduled reductions in the total amount of facility or by all
outstanding loans being repaid on the date of termination
Rollover Loan
Flexible Financing Tool
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Bhartis choice of Term Loan
How and When
Syndicate amount - $8.5 billion priced at LIBOR+195 basis pts
Tenure of6 yearswith an average maturity period of 4.7 years
First principal outgo will be after 2.5 years
Annual interest payment on loan - $200 million
Loan Details
Consortium of11 bankswhich recently increased to 15
Standard Chartered Bank, Barclays Capital, Australia and New Zealand BankingGroup Ltd, BNP Paribas SA, Bank of America Merrill Lynch, Credit Agricole CIB,DBS Bank Ltd, Hongkong and Shanghai Banking Corp. Ltd, Bank of Tokyo-Mitsubishi UFJ Ltd, Sumitomo Mitsui Banking Corp. & State Bank of India.
Lead Arranger & Lead Adviser Standard Chartered Bank
Co-adviser Barclays Capital
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How and When of the Process
Is it a lifelong liability
Term Sheet Mandate Letter
Mandate fromBorrower toArranger
Facility Arrangement Fee Letters
Conditions Precedent
Signing /Drawdown
Invitation Information Memorandum Syndication Agreement
Syndication
Standard Chartered Bank
is appointed as the LeadArranger by Bharti.
The term sheet is signed
giving the details of 11
banks involved, etc.
MediumTerm loan of $8.5
billion sanctioned
SBI - $1.5 billion (including
$500 million dollar loan)
StanChart - $1.3 billion
Barclays - $0.9 billion
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Getting out of the Agreement
How
RealizingCapital:
Advantage of
newopportunities
Risk/PortfolioManagement
RegulatoryCapital
requirements
Crystallize aloss
Euro CrisisBhartis ratingfall to BB+from BBB-
Lending costs rise: SBI five yearoverseas bond sold at 260 bps
Offload in secondary market at a
loss??
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Full or Partial Break-up ?
Four new banks join Bharti syndication to lower exposure of existing banks
Lender effectively transfers all the rights and obligations Dependent on provisions in loan agreement Borrower is party to the novation process
Novation
Full loan: absolute In writing and signed by existing lender Notification to borrower
Legal assignment
Slightly Similar to legal assignment No notification to borrower
EquitableAssignment
Negotiable agreement between lender and external party
Full or partial funding
Funded
Participation
No upfront payment Risk participant gets fee Risk participant has to make payment in special cases like default
RiskParticipation