Mechanisms Used in Common Law and Civil Law in Transfer of Syndicated Coursework

Mechanisms Used in Common Law and Civil Law in Transfer of Syndicated Dept - Coursework Example It is also subject to being added upon by legislation from a law making legislature such as parliament. Here previous rulings give guidance on current cases and are referred to. It originated in England and is still used commonly there and in former Great Britain colonies such as Australia, New Zealand Canada and in most countries of the commonwealth. Debt syndication is a situation where many lenders come together to offer credit to an individual entity, a conglomerate, or a government to spread out the debt risk among the participating lenders (called the syndicate) and share in the profits of the debt proportionately under a single syndicated loan agreement. This paper gives an analytical introspection into common and civil law in reference to transfer of syndicated debt. Loan amounts involved in syndicated debts are normally much larger than normal debts, and a default could have serious ramifications on a single lender, hence the need to spread the risk among many lenders. There is a lead borrower known as the ‘agent’ that does most of the administrative work concerning the loan or contributes proportionally larger debts.1 A syndicated loan can be provided as a term loan provision where a specified amount of loan is provided over an agreed time period of time called the ‘term. In addition, the borrower is usually allowed, under the given circumstances, a brief time after the loan availability to withdraw money up to the maximum limit and then repays in installments (amortization) or once at the expiry of the term (bullet payment). The syndicated loan may also be provided as a revolving loan facility where the borrower draws portions of the loan amount for a given period, for instance, within three to six months after which the repayment is due and can draw from the loan facility to repay the outstanding loan. This is a concept which is referred to as rollover loan. A syndicated loan can also be in the form of a general loan where new bor rowers can come into the agreement under specific circumstances and may also combine rollover loans and multiple term loans. This is a concept which is legally defined within the law.2 The borrower usually starts by approaching the lead borrower (agent) who advises the said borrower and contacts other lenders. The agent is the contact person with the borrower and represents the views of the syndicate. The agent also monitors how the borrower meets terms and conditions of the loan agreement. In addition, the agent keeps all records, collects all payments and interest from the borrower, and then pays both members of the syndicate at a fee. After a loan is approved with the requisite legal requirements satisfied, the borrower can then access the loan under the agreed terms. In this case, the borrower may wish to transfer the loan to a third party for a variety of reasons listed in the following part of the discussion. Acquire Capital The borrower may sell its interest in the syndicated loan if it is a long term loan facility to get capital or benefit from new better loan facilities. Reduce or Avoid Loss The borrower may experience difficulties and decide to sell its loan commitment to distressed debt specialists Capital