group 6 loan syndication

8/8/2019 Group 6 Loan Syndication

1/12

Abhisheikh Lahoti

Aditi Bodha

Amanpreet Kaur

Anchal Gupta

Anshul Gupta

Atul Akash

Group 6

Corporate Strategy for

Loan Syndication


2/12

We look at long term funding options

Tame Africa :International Finance through an acquisition


3/12

Financing Options Syndicated loan

African Safari : Brief Snapshot


4/12

Why not Canons and Guns to tame Lions ?

Why loan Syndication

Bharti D/E 0.4 TO 1.2

SPV Near term balance sheet healthGuarantee Long term risk

3 G

Auction

Zain

Debt costly - 195 basis points above LIBOR

Equity Markets Not approving of move (10

time multiple of EBIDTA levels)

Flexibility Nigerian Assets regulation risk Loan syndication provided flexibility

RISK VERY HIGH Zain Financial

Paralysis


5/12

Syndicate Loan Types

Loan Syndication :A weapon to tame wild African lions

Benefits

Syndicate Credit Agreements: more than one bank

Agree to provide a commonborrower

Credit facility on common terms &

conditions Governed by a Single Legal

Document

Factors Indicating CreditSyndicate Markets

Parties Involved

Pressure to rebuild Capital Positions Ensure Adequate Return on Assets

Bank Policies

Demand for Syndicate Term loans

Compared with alternative source offunding

Cost Comparisons

Term Loan Revolving Credit


6/12

Process Benefits to Bharti

Banks

No 11 bilateral separate agreements required Loan facility, maturity Single set of terms and conditions

One comprehensiveCredit Document

Standby credit facilities Working capital requirements Project financing Term Loan with average maturity 4.7 yrs

Revolving Loan Facilities

Tailor made toBhartis

requirements

Combine various sources of financing with differentschedules and Repayment schedules and maturity levels

Competitive pricing: Interest rate negotiated at 195 bpsFlexible tool


7/12

Process Benefits to Bankers

Options offered

Enhance andfortify relations

Cross-sell otheropportunities

11 out of 12banks acceptedthe syndication

offer

Risk sharing

Limit creditexposure

Limited exposurefor each bank tohighly leveraged

deal

Activesecondary

market

Options to sellfully or partiallythe loan

agreement

Banks can

offload, althoughat a loss whencredit rating of

Bharti fell


8/12

The Options for Syndicated Loans

Bhartis choice

Term Loan Facility

A specified capital sum provided over a set period of time known as term

Borrower is allowed a short period after executing loan ( availability orcommitment period) during which time it can draw loan upto a specified maxlimit

AmortizingVs

Bullet Repayment

Once a term loan is repaid, it cannot be re-drawn

Revolving Loan Facility

Maximum aggregate amount of capital available over a specified period of time

Allows the borrower to drawdown, repay and re-draw loans advanced to it

Each loan borrowed for a specified period 1,3 or 6 months Repayment by scheduled reductions in the total amount of facility or by all

outstanding loans being repaid on the date of termination

Rollover Loan

Flexible Financing Tool


9/12

Bhartis choice of Term Loan

How and When

Syndicate amount - $8.5 billion priced at LIBOR+195 basis pts

Tenure of6 yearswith an average maturity period of 4.7 years

First principal outgo will be after 2.5 years

Annual interest payment on loan - $200 million

Loan Details

Consortium of11 bankswhich recently increased to 15

Standard Chartered Bank, Barclays Capital, Australia and New Zealand BankingGroup Ltd, BNP Paribas SA, Bank of America Merrill Lynch, Credit Agricole CIB,DBS Bank Ltd, Hongkong and Shanghai Banking Corp. Ltd, Bank of Tokyo-Mitsubishi UFJ Ltd, Sumitomo Mitsui Banking Corp. & State Bank of India.

Lead Arranger & Lead Adviser Standard Chartered Bank

Co-adviser Barclays Capital


10/12

How and When of the Process

Is it a lifelong liability

Term Sheet Mandate Letter

Mandate fromBorrower toArranger

Facility Arrangement Fee Letters

Conditions Precedent

Signing /Drawdown

Invitation Information Memorandum Syndication Agreement

Syndication

Standard Chartered Bank

is appointed as the LeadArranger by Bharti.

The term sheet is signed

giving the details of 11

banks involved, etc.

MediumTerm loan of $8.5

billion sanctioned

SBI - $1.5 billion (including

$500 million dollar loan)

StanChart - $1.3 billion

Barclays - $0.9 billion


11/12

Getting out of the Agreement

How

RealizingCapital:

Advantage of

newopportunities

Risk/PortfolioManagement

RegulatoryCapital

requirements

Crystallize aloss

Euro CrisisBhartis ratingfall to BB+from BBB-

Lending costs rise: SBI five yearoverseas bond sold at 260 bps

Offload in secondary market at a

loss??


12/12

Full or Partial Break-up ?

Four new banks join Bharti syndication to lower exposure of existing banks

Lender effectively transfers all the rights and obligations Dependent on provisions in loan agreement Borrower is party to the novation process

Novation

Full loan: absolute In writing and signed by existing lender Notification to borrower

Legal assignment

Slightly Similar to legal assignment No notification to borrower

EquitableAssignment

Negotiable agreement between lender and external party

Full or partial funding

Funded

Participation

No upfront payment Risk participant gets fee Risk participant has to make payment in special cases like default

RiskParticipation

group 6 loan syndication

Documents