Overview of syndicated lending scheme in international market - Контрольная работа

INTRODUCTION Actuality of the theme of the diploma work loan syndication is a funding mechanism where two or more banks come together contribute a portion of the loan to finance the project. Loan syndication1 is the most common form used for funding project finance deals, especially when it involves large sums. This is especially true for energy and infrastructure projects. The implementation of the planned project depends on the availability of funds to finance it from start to completion. Equity contribution is usually limited and the project is usually financed by debt for a large proportion of its finance structure, sponsors therefore must ensure that funds are available before the project starts. The project finance is based on limited or non-recourse to sponsors, therefore repayment of the loan is based on the isolated and assignable cash flow from the project . Therefore banks need assurance to the effect that the project will be able to generate revenue after its completion phase before committing funds to the project. This is done by ensuring that the project has an off-taker, commitment by sponsors through various covenants and representations, input supply contract (fuel or gas in case of power projects), engineering, procurement and construction contract and government support undertakings. According to both local and foreign experts the economic growth of Kazakhstan is very much dependent on the export of mineral resources and quite negatively reacts on decrease of their prices in the world market. Therefore the idea of diversification becomes more and more actual for Kazakhstan reality. Diversification and industrialization of country is one of the major goals that declared by the State. In light of that objectives numbers of strategic plans and state programs on innovative industrial development have been implemented. According to them reorientation of economy to the export of processed products with high additional value instead of raw materials, improvement of transport infrastructure in order to efficiently benefit from attractive transit potential of Kazakhstan, development of agriculture are awaited. Assessment of the current state of scientific problem. Obviously that such a tremendous incentive requires significant financial resources. They might be provided either by the state itself or might be raised with involvement of private capital either throughout bank loans, stock market, or venture capital. In that situation banks seem more likely to participate, because neither stock market nor venture capital market is developed enough in Kazakhstan. However huge amounts of money imply greater risk, which seriously affects the willingness of banks to provide loans in large amounts. In such situations syndicated lending scheme can satisfy their desires by allowing them to get involved in the loan while mitigating the risk. May be therefore exactly “syndicated lending has played a key role in the growth and development of companies and countries in both developed and emerging markets”. Purpose. In this paper, we estimate models for credit spreads on syndicated loans originated by investment and commercial banks. Practical basis of the diploma work writing. We also add to the literature on loan syndicate structure by showing that the availability of other risk management tools significantly affects syndicate composition. Sufi (2007) and Dennis and Mullineaux (2000) show that lenders form more concentrated syndicates when borrowers are more opaque. However, not every syndicate suggests an existence of syndicated lending scheme. For instance, a group of creditors that agreed with each other to provide loans to its’ customers with not less than a certain level of interest rate, might be recognized as a syndicate for the purpose of antitrust legislation in most of jurisdictions. Nevertheless, this type of syndication and lending wouldn’t be a syndicated lending as it is understood in practice. So what is a syndicated lending? In order to answer this question, it is necessary to define the following main characteristics of such deals. They are the following [1]: - as stated above - the existence of group of creditors organized for the concrete deal; - the loan is provided by this group of creditors to one or more borrowers (not potential, but existing borrowers) - the loan is provided on the basis of common agreement or several agreements derived from the common deal (for instance, sometimes the structure of the deal may consist of a multiple agreements and inter-creditor agreement); - several obligations to creditors, thus, none of creditors is liable for breach of obligation by the others; - certain level of joint control, or so-called syndicate democracy principle, according to which the creditors delegate certain power to make decisions jointly by the majority of votes; - benefits sharing, meaning that any proceeds received by the creditor should be proportionately divided between the creditor