Syndicated Lending

Syndicated lending is where credit is given to one or more borrowers by a group of lenders (syndicate members).

A borrower signs a syndication agreement made with an arranger or agency bank, for a loan, facility, or letter of credit, for example. A syndicated credit can involve more than one syndicate member, who signs a syndication commitment with the arranger (for example, a financial institution).

Each member of the syndicate can be part of one or more participation agreements, which specify the extent to which a syndicate member is participating. A syndicated credit can be disbursed in one or more tranches, which can have different interest rates and be in different currencies. A tranche can be assigned to one or more participation agreements. You can have, for example, a syndicated loan where only the members of the syndicate are liable. In such a case, the credit is given by the arranger and can be in a single tranche.

The syndicated credit can consist of one or more loans. Related accounts such as syndication share accounts contain information about current balances and where settlements are made.

The following figure represents a business example of syndicated lending, whereby the parties involved are represented as business partners and the syndication agreement and syndication commitment are represented as specializations of financial contracts in the data model:

Data Model

You can represent syndicated lending in the data model by using the Syndication Agreement and Syndication Commitment entities. The borrower, arranger, and syndicate members are represented by the business partners assigned to the financial contract and are not shown in the figures in the sections below. The Bank Account entity is linked to the Syndication Agreement and Syndication Commitment entities through the Loan entity to cover the bank accounts related to a syndication agreement.

Syndication Agreement

A syndication agreement is a central contract between an arranger and a borrower that defines basic covenants and rules.

Note

A financing scheme can also be represented in the data model. This is structurally the same as a syndication agreement except that it is used for a complex loan transaction that has not yet been syndicated but might be later in the lifecycle of the loan. You can represent this in the data model by using the Financing Scheme diagram, which is similar to the Syndication Agreement diagram. However, since this is for documentation purposes only, these entities are not represented in the physical data model (PDM), where you need to use the syndication agreement fields in the Financial Contract entity and save the information for the Tranche in Finance entity in the table of the Tranche in Syndication entity. Since the entities are not present in the PDM, there is no separate database table in HANA.

The following figure is an example of a model for a syndication agreement using the Syndication Agreement diagram. Note that in the data model, the Loan entity is used to represent loans but also to represent syndication share accounts:

Syndication Commitment

The syndication commitment is a central contract between an arranger and syndicate members that defines the legal obligations of those parties.

The following figure is an example of a model for a syndication commitment with example entities using the Syndication Commitment diagram:

More Information

For more information, see the related entities and their definitions in the data model represented in SAP PowerDesigner.