[MUSIC] Hello, my name is, Terence Shanahan, and I'm the Global Head of Syndicate Department of Société Générale, and I'm located in London. >> Hi, my name is José Antonio Olano. I'm the Global Head of Loan Syndicated SG, based also in London. >> And today we'll give you a global picture of the syndicate activities and explain what loan syndicate is about. So where does syndicate fit within the financing chain. The primary function of an investment bank is to assist its corporate clients with their financing needs. At Société Générale, this function is provided by the Global Banking and Advisory group which incorporates five business divisions with differing areas of expertise such as asset finance for aviation, real estate and shipping. Infrastructure, finance and many areas like waste to energy, transport and social infrastructure. And renewables finance such as wind, solar and new technologies as well as many other areas of finance. Our corporate clients rely on us to provide them with advice on the best ways in which to finance their activities which can include general corporate purposes (GCP), Capex, New Projects or Acquisitions. Many of the projects that we assist our clients with require financing of a size that is beyond the ability of Société Générale balance sheet alone and that's where syndicate enters into the discussion. Syndicate is one of five divisions, but unlike the other divisions it does not finance transactions directly with the client. Syndicates main role is to provide clients with an insight into the global markets to enable the client to make an informed decision on the best route to finance each project based on the characteristics of the project. Syndicate's other main role is to assist the other business divisions in offering the client a one stop underwritten financing solution to their needs. And the solution can be then sold onto a syndicate process to other investors, such as other banks or financial institutions. Syndicate enables SG to de-risk a client commitment to a final hold position which is fitting with our balance sheet, size, and our regulatory requirements. So why do we provide a global solution? Well, within SG, our syndicate platform is global with >120 staff located in the Americas, Asia, and throughout Europe. This enables us to provide clients with advice and solutions in multiple currencies with a very broad base of investors located all over the world. In each region, we're also able to match the expertise within the business lines to syndicate staff with similar knowledge bases. There are many different types of facilities in the debt market. Within the debt markets, there are many formats that can be used to borrow in, these include loans, bonds, and private bonds in the broadest forms. The loan market is perhaps the most flexible of the three. providing a tailor-made solution strategy for its clients. Each loan is structured and documented to meet the specific needs of the project that we're looking at. On the other hand, the bond market provides for very large boiler plate financings generally issued off of an existing platform, and existing documents which permit regular issuance in several currencies. Speed and size are the order of the day rather than tailor-made solutions. Bonds tend to be sold to institutional investors in fixed rate format and within the bond market, there are many sub-categories of bonds. Finally, private bonds and schuldschein are two types of bonds. that are type of hybrid between public bonds and loans. They can incorporate some tailor made solutions, while offering a fixed rate format. So how do these different facilities fit together to provide a single solution to our clients? When today's complex financial markets many transactions are too large to finance in a single market and in a single currency. If you look at a large acquisition financing today, it can often be in excess of 10 billion Euros. And the best solution will often incorporate both a term loan and a bridge to bond or bridge to equity. There's also an opportunity to offer multiple currencies with a global syndication executed in Europe, America, and Asia. This global placement requires careful coordination within the various regions, both within SG and with the other banks involved within the syndication process. Further, the bridge to bond may be taken-out in a combination of markets including public bond market and private bond market and schuldschein. Ensuring the best execution of all aspects of these complex transactions requires a global syndication operation with expertise in all of the markets being accessed. In the following module, you're going to hear a little bit more from my colleagues specifically on the characteristics of the loan syndicate activities. >> So what is loan syndication? Loan syndication occurs in situations where a borrower requires a large sum of capital that may be too high for a single bank to provide. And a group of lenders called the syndicate needs to be formed. A syndication team acts as an intermediary between the borrower and the several lenders. In terms of parties, we have: borrowers who are companies that seek a loan of a large size for a variety of reasons, and we will go into that later. And on the other side, we have the lenders which can be banks or non-bank financial institutions such as, insurance companies or credit funds, who are willing to take a portion of the loan. It is the syndicate team's responsibility to provide an opinion on whether a transaction can be placed and at what terms and conditions. Loan syndicate provides the business lines, and their clients, advice on how to price and structure a transaction and on the expected liquidity. The objective is to find the right balance between the needs of the borrower and the requirements of the potential lenders. Transaction sizes vary greatly from 100 million Euros at the very low end to jumbo deals such as the over 20 billion Euros loan raised in 2021 by German real estate company Vonovia supporting their acquisition of competitor Deutsche Wohnen. So how does the typical syndication process look like? A typical syndication process last 2-3 months from the initial contact with the borrower to the final signing of the transaction. Once there is a good understanding of the client requirements, loan syndicate will agree internally the appropriate terms, such as pricing and maturity, and present the proposal to the client. If accepted by the client, we will move to launch the transaction to the market, inviting a number of banks and investors that we believe will be interested in participating in the financing. Information is provided to the potential lenders who will typically have three weeks to analyze the deal and obtain their internal approvals. Once commitments have been gathered, a portion of the transaction will be allocated to each lender, and the documentation will be signed by all parties. There are three main types of loan facilities that can be syndicated, Term loans: Under a term loan facility, lenders provide a specified capital sum over a set period of time, typically five years. Revolving Credit Facilities: a revolving credit facility provides a borrower with maximum aggregate amount of capital available over a specified period of time. However, unlike a term loan, the revolving credit facility allows the borrower to draw down, repay, and redraw loans during the term of the facility according to its needs. And finally, we have Bridge Loans: A bridge is a loan with a shorter maturity, usually 1-2 years, which is meant to be repaid by a capital markets take-out, such as an equity increase, or bond issuance, or by divestments. Syndications can be of different types, as well, depending on the nature of the commitment provided by the arranger bank or banks. Underwritten transactions are those where the arrangers first guarantee the entire commitment, then syndicate the loan. If the arrangers cannot place the whole transaction, they still have to deliver the guaranteed commitment, so they can be left with an exposure above their desired hold level. This is why we speak about underwriting risk. On the other hand, we have best-efforts transactions. In this case, the arranger commits only the portion of the transaction it wants to hold on its balance sheet but does not guarantee to provide the entire amount of the loan, leaving the result dependent on the response from the market. If the loan is not fully subscribed, the transaction may not close or may close for a lower amount or may need significant adjustments to its terms in order to clear the market. And finally we have Club Deals, in this case, the syndicate of lenders, typically of a smaller size, is put together directly by the borrower, usually by calling on its relationship lenders. And with this, we conclude our presentation. Thank you very much for listening, and we hope you found it helpful. [MUSIC]