Finance Concept-3 | What is Loan Syndication and how does that work in Loan Market? Watch here #Finance

foreign Loan advance amount offered by the lender to the borrower right so if I take the example of bank if you’re looking for a Loan so where bank will play a role as a lender and who offer the Loan amount to the borrower right and

when Mr syndication try to understand the meaning of word which is syndication syndication it means group of institution or group of member or group of people or group of companies or group of banks come together right it can be it Banks and bfc’s funds they come together and they offer again

lending facility to the borrower so that term we can call it as Loan syndication Loan syndication is a part of fixed Income here you would see two different terms one is CDO and another one is CLO CDO means collateralize Debt

obligation so that comes under abs means abs and MBS that comes under the CDU or clo that comes under the Loans Loans different Loans fixed or flow with the fixed and floating interest payments right so here we’re gonna talk about this

portion clo and here you can claim clo Mains Loan syndication so Loan syndication what exactly Loan syndication is so for XYZ products group of Institutions will come together and offer The Lending facility to the institution so that process we can

call it as Loan syndication so with one example I’ll brief you the process let’s say TCS means company will play the role as a borrower is looking for a Loan for a year project so TCS want to expand the project a and that’s what they are looking

for one lakh rupees Loan amount right so a TCS management the approach to the HDFC bank for a Loan Loan uh worth of rupees one lakh but HDFC Bank denied it because they don’t want to take the much risk in uh this a project of TCS but the HDFC

Bank committed to the TCS so they can arrange the facility of Loan of rupees 1 lakh not from them but they can communicate with the other Banks like JP Morgan axis bank or other Banks who are interested or willing to contribute or pay as an advanced amount to the TCS right so here

HDFC Bank let’s say they have approached the HDFC Bank sorry axis Bank it is stating that the HDFC bank they have they have 50 000 rupees they are looking for a one more 50 so it means access bank there they have agreed to pay 30 000 and similar way so JPMorgan also agreed with the 20 000 so

we’re here 20 plus 50 plus 30 would be 1 lakh rupees let’s say interest payment is around 12 percent where the TCS agreed so it means TCS were looking for 12 interest payment on this deal amount right for random so they are agreed with it here HDFC bank will sign the agreement with

access bank and also HDFC bank will sign the agreement with JP Morgan because here sdfc bank is holding the major portion right understand this term as well HDFC bank is holding major portion that’s what here Prime Loan holding will be with the HDFC bank and subprime

Loan holding with will be with the JP Morgan and axis bank here the JP Morgan uh JP Morgan and axis Banks Loans will be like you know very risky the reason is if if the TCS declare as a bankruptcy then directly HDFC will take the control fast and HDFC will Bank

sell the Assets of project a and recover the money their principal amount first and remaining amount will be transferred to the axis and then access will be transferred to the JP Morgan so that’s how this process works but the important here is HDFC bank will organize or

arrange the facility means payment rupees right and then that payment will be transferred to the TCS for project EA so this particular process we can call it as a Loan syndication because at the one side you would see there’s a group of Institutions come together and they

have funded to the this particular project EA right with regards to this you would see a number of other terms like funded amount and funded amount commitment Global commitment pay down principal pay down there would be a number of terms so if you are interested to understand those terms then you

can uh just you know in common say it yes that you are looking for a same explanation or terms I’ll be more happy to prepare CashNews.cos on it right so in upcoming time you would see the CashNews.cos on those terms as well if you are interested otherwise that’s fine and if you like

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