LING 530 Lecture Notes - Lecture 14: Overdraft, Syndicated Loan
27 Jun 2018
School
Department
Course
Professor
March 20 and 22, 2018
Cascade Credit Agreement – Percentages of lenders
Agent receives notice of borrowing from the borrower and communicates to the lenders
to put up their % of their borrowing that corresponds to the loan.
12 banks participating in the syndicated loan; each has a %. Each lender is liable to the
extent of its commitment (its % of the loan that the lender agreed to fund).
oEach is liable to a portion of the loan; not the totality.
oEach lender can only be called upon to make loans up to their % that they agreed
– lender pro rata share of the loan.
Borrower concerns:
oTime: Borrower is concerned about the time it will take for the agent to collect
all of the funds.
oLenders might not have the funds.
In Canada, banks don’t typically become bankrupt like in the US.
How does the syndicate work when something goes wrong?
Characteristics of Credit
What is its amount, duration, how can it be utilized?
Term sheet
Facility A: the purpose was operating credit. This was the manufacturing cycle.
Liability
“Severally and not jointly or solidarity”
Each lender is liable to their own individual percentage
Remember that credit is the “availability to make borrowing”. Here, there is a period to
which credit available, that is, closing date to maturity.
oIn our credit cards, the duration is indeterminate.
Overdraft
Either provide a loan conventionally where the bank gives the money or pays an
overdraft. The latter is more an incident than a planned loan.
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Agent receives notice of borrowing from the borrower and communicates to the lenders to put up their % of their borrowing that corresponds to the loan. 12 banks participating in the syndicated loan; each has a %. Lender pro rata share of the loan. Borrower concerns: time: borrower is concerned about the time it will take for the agent to collect all of the funds, lenders might not have the funds. In canada, banks don"t typically become bankrupt like in the us. Each lender is liable to their own individual percentage. Remember that credit is the availability to make borrowing . Here, there is a period to which credit available, that is, closing date to maturity: in our credit cards, the duration is indeterminate. Either provide a loan conventionally where the bank gives the money or pays an overdraft.
