Because syndicated loans tend to be much larger than standard bank loans, the risk of even one borrower defaulting could cripple a single lender. Syndicated loans are also used in the leveraged buyout community to fund large corporate takeovers with primarily debt funding.What is pipeline risk in loan syndication?
This is the risk associated with marketing the loans during the syndication process. It stems from the need to underwrite loan syndications, and uncertainty about how much of the loan can actually be placed with institutional investors. Source: Shared National Credit Program. Two episodes in the last ten years illustrate that pipeline risk.What is a loan syndication?
Loan syndication is the system of involving various lenders to fund specific portions of a loan for a single borrower. This most often occurs when a borrower requires an amount too large for a single lender to provide or when the loan is outside the scope of a lender's risk exposure levels.Why do multiple lenders form a syndicate?
Thus, multiple lenders form a syndicate to provide the borrower with the requested capital. Loan syndication is when a group of lenders come together to fund various portions of a single loan for a single borrower. Loan syndicates are created when a loan is too large for one bank or falls outside the risk tolerance of a bank.