What is a direct syndicated loan?
Direct syndicated loan refers to a syndicated loan in which the borrower directly negotiates and signs the same loan contract with each member bank under the unified organization of the lead bank, and each member bank issues loans to the borrower according to the conditions agreed in the loan contract and the loan amount promised in advance, and the agent bank is responsible for loan management and recovery.
Characteristics of direct syndicated loans [1]
Generally speaking, direct syndicated loans have the following characteristics:
(1) The role of the lead bank is limited and phased. In direct syndicated loans, the role of the lead bank is generally limited to the formation of syndicates, the organization of relevant negotiations and the drafting of relevant legal documents. Once the syndicated loan contract is formally signed, the above duties and functions of the lead bank will be terminated, and the correspondent bank will formally assume the responsibility of managing the syndicated loan. At this time, the lead bank, as a member of the syndicate, is in an equal position with the ordinary participating banks, enjoys corresponding rights and undertakes corresponding obligations.
(2) The rights and obligations of member banks are relatively independent. The rights and obligations assumed by each member bank in the direct syndicated loan are independent of each other, and there is no joint relationship between them, that is, each member bank independently enjoys its rights and undertakes its obligations under the syndicated loan contract. A member bank waives its rights under the syndicated loan contract, which does not mean that other member banks also waive their rights under the syndicated loan contract. The failure of a member bank to perform its obligations under the syndicated loan contract does not mean that other member banks fail to perform their respective obligations under the syndicated loan contract, and the corresponding responsibilities shall be borne by the member banks themselves. Unless otherwise agreed in the syndicated loan contract, other member banks will not bear any responsibility for this.
(3) Member banks are relatively stable. The member banks of the direct syndicated loan have been identified after the establishment of the syndicate, and they have participated in the related work of the syndicated loan from the beginning, and they have a deep understanding and clear expectations of the syndicated loan, and will not easily transfer their loan shares under the syndicated loan contract; On the other hand, although the syndicated loan contract stipulates that each member bank has the right to transfer its loan share under the syndicated loan contract, the syndicated loan contract also has clear restrictions on this transfer, which also makes the composition of member banks relatively stable.
(4) All member banks use the same loan contract with the same loan conditions. The member banks of the direct syndicated loan negotiate the syndicated loan contract with the borrower and sign the same syndicated loan contract with the borrower on the same loan terms.
Parties to direct syndicated loans and their legal relationships [1]
(a) the parties to the direct syndicated loan and their respective main rights and obligations
Generally speaking, participants in direct syndicated loans include borrowers, lead banks, correspondent banks, participating banks and guarantors. In order to attract more banks to participate in loans, some syndicates may also set up virtual positions such as deputy lead bank, deputy agent bank or arranging bank. Their rights and obligations are close to or similar to those of the lead bank or correspondent bank, but their actual functions are generally limited, so I will not discuss them here.
1. Borrower and its main rights and obligations
The borrower of a direct syndicated loan refers to an enterprise or other organization that applies for a loan from a syndicate according to the provisions of the syndicated loan contract and enjoys corresponding rights and obligations. The borrowers of direct syndicated loans can be governments, central banks, state institutions, international financial organizations and enterprises or other organizations with legal personality. Among them, governments, central banks, state institutions and international financial organizations as borrowers mostly appear in international syndicated loans (including direct and indirect international syndicated loans), while borrowers of domestic syndicated loans (including direct and indirect international syndicated loans) are generally limited to enterprises or other organizations with legal personality.
In direct syndicated loans, the rights and obligations of borrowers mainly include:
(1) Entrusted to the host bank
(5) Pay relevant fees to the host bank, correspondent bank and other syndicated member banks on time;
(6) Obtaining corresponding loans according to the syndicated loan contract and using the loans according to relevant agreements;
(7) Pay the principal and interest on time;
(eight) in accordance with the provisions of the syndicated loan contract, to provide its own financial information and other loan related information to the member banks, and accept the supervision and inspection of the agent bank and the member banks;
(nine) to bear the liability for breach of contract in accordance with the provisions of the syndicated loan contract;
(ten) other rights and obligations stipulated in the syndicated loan contract or other relevant legal documents.
2. Lead bank and its main rights and obligations
The lead bank in direct syndicated loans, also known as the arranging bank, refers to the bank entrusted by the borrower to form a syndicate to issue syndicated loans to the borrower. The lead bank is usually selected by the borrower according to the loan demand. Generally speaking, it should be a bank with strong strength, high reputation in the financial sector, extensive contacts with other banking businesses and close ties with borrowers.
In fact, the lead bank is the organizer of direct syndicated loans, which mainly acts as a bridge between borrowers and lenders. Specifically, the rights and obligations of the lead bank mainly include:
(1) Accept the entrustment of the borrower and make a commitment in the form of a letter of commitment as the basic condition for the borrower to lend to the bank and provide loans to the borrower;
(2) prepare information memorandum;
(3) Send an information memorandum and an invitation to participate in syndicated loans to potential lenders;
(4) If the potential lender truthfully discloses all the facts of the borrower that it knows, and the member bank suffers losses due to fraud or negligence, the lead bank needs to bear corresponding legal responsibilities (this responsibility can be eliminated by technical means, such as clearly stipulating that each member bank independently investigates and evaluates the syndicated loan, and each member bank's judgment and decision on the syndicated loan does not depend on the information memorandum provided by the lead bank, etc. );
(5) Select syndicated lawyers, organize member banks, borrowers, guarantors and other relevant parties to draft and negotiate related legal documents such as syndicated loan contracts and inter-bank cooperation agreements, and organize relevant parties to sign syndicated loan contracts and inter-bank contracts.
Making agreements and other relevant legal documents;
(6) Assist the borrower to prepare the relevant basic documents for the first withdrawal and supervise the availability of the first loan of each member bank;
(7) Charge the borrower for miscellaneous fees and other expenses;
(eight) to enjoy the rights enjoyed by participating in the bank and undertake the obligations that should be undertaken by participating in the bank;
(9) Other rights and obligations stipulated in the syndicated loan contract, inter-bank cooperation agreement or other relevant legal documents.
It should be noted that part of the rights and obligations of the lead bank in direct syndicated loans are concentrated in the formation stage of syndicated loans, which has a strong stage. Unless otherwise agreed in the syndicated loan contract or inter-bank cooperation agreement, when the syndicated loan contract is formally established and signed, the lead bank will become an ordinary participating bank, enjoy corresponding rights and assume corresponding obligations, and the correspondent bank will be responsible for the daily management of the syndicated loan.
3. The correspondent bank and its main rights and obligations
The correspondent bank in the direct syndicated loan refers to the bank that accepts the authorization of each member bank and manages the syndicated loan on behalf of the syndicate. As mentioned above, after the syndicated loan contract is signed, the lead bank's organizational responsibility for the syndicated loan ends, and the daily management responsibility of the syndicated loan is assumed by the agent bank, which mainly includes the issuance and recovery of the loan, the post-loan management of the loan, the coordination of relations among member banks and between member banks and borrowers and guarantors, and the handling of default events. It can be seen that the role of correspondent banks in direct syndicated loans is very important. In addition, the correspondent bank can charge the borrower agency fees and other fees, and the correspondent bank can also indirectly obtain relevant benefits in the daily management of syndicated loans. Therefore, the choice of the direct syndicated loan agent bank should be very cautious, and the agreement of the agent bank's liability for breach of contract should be as clear and detailed as possible. In the actual operation process, the correspondent bank is mostly determined by the borrower after consultation with the syndicated finished products.
Generally speaking, the rights and obligations of the correspondent bank mainly include:
(1) is responsible for the issuance and recovery of loans, mainly including reviewing the withdrawal notice after receiving the borrower's withdrawal notice, and promptly notifying all member banks to lend money according to the specified time, amount and lending method after approval; Inform the borrower in writing of the current interest amount, principal amount and the amount allocated among the lenders at some time before repaying the loan principal and interest; Transfer the received principal and interest and liquidated damages to the bank account designated by each member bank on the interest payment date and repayment date; The borrower's loan shall not be misappropriated or withheld in any form.
(2) Responsible for the daily management of loans, mainly including opening relevant accounts for borrowers and strict supervision; Supervise the borrower to use the loan according to the purpose agreed in the syndicated loan contract; Check the operating status and credit status of borrowers and guarantors; Supervise the guarantor to fulfill his obligations in accordance with the guarantee contract.
(3) To be responsible for the contact and communication within the syndicate and between the syndicate and the borrower and guarantor, mainly including timely notifying the member banks of the notice received from the borrower or guarantor to the syndicate; Timely deliver the notice and other documents sent by the syndicate to the borrower or guarantor to the borrower or guarantor; Accept inquiries from member banks and give timely feedback.
(4) Convene and preside over the syndicate meeting and implement the resolutions of the syndicate meeting.
(5) Handling of default events.
(6) Diligent and conscientious, and shall not use the position of the correspondent bank to seek illegitimate interests for itself or harm the interests of other member banks.
(7) Be liable for breach of contract or compensation for the acts of member banks that violate syndicated loan contracts and inter-bank cooperation agreements or fail to perform their duties.
(8) Charge the borrower agency fees and other fees.
(9) Resign from the post of correspondent bank.
(10) Enjoy the rights enjoyed by participating banks and undertake the obligations that participating banks should undertake.
(1 1) Other rights and obligations stipulated in the syndicated loan contract, inter-bank cooperation agreement or other relevant legal documents.
4. Participating banks and their main rights and obligations
The participating banks of direct syndicated loans refer to banks that participate in syndicated loans and provide loans according to their promised shares, except the lead banks and correspondent banks. Compared with the lead bank and correspondent bank, the participating banks are in a secondary position in the syndicate and generally do not directly participate in loan management. Participating banks, lead banks and correspondent banks are collectively referred to as member banks.
Generally speaking, the rights and obligations of participating banks mainly include:
(1) Participate in the negotiation of relevant legal documents such as syndicated loan contract and inter-bank cooperation agreement, and sign relevant legal documents;
(2) Undertaking the obligation to grant loans to borrowers in accordance with the syndicated loan contract, inter-bank cooperation agreement and other relevant legal documents, including granting loans on time, in full and in the agreed proportion at any time;
(3) Collect the loan principal and interest and liquidated damages from the borrower through the agent bank;
(4) Understand the credit standing and operation of the borrower and guarantor through the agent bank;
(5) Understand the performance of the syndicated loan contract through the correspondent bank, and obtain the documents and materials related to the syndicated loan;
(6) Charge the borrower the commitment fee and other expenses;
(7) the amount of loans transferred, including loans issued and loans not issued;
(8) Independently claim rights from the borrower or guarantor (from the perspective of the unity of the syndicate and the balance of interests of all member banks, this right can be restricted, if voting at the syndicate meeting or authorization from the correspondent bank is required. );
(9) Proposing to convene or convene a syndicate meeting, participating in the syndicate meeting and exercising the right to vote, and implementing the resolutions of the syndicate meeting;
(10) It is suggested to remove the correspondent bank;
(1 1) Inform all member banks of the received notices and other documents sent by borrowers or guarantors in time;
(12) It is forbidden to exercise the right of set-off against the money in the account opened by the borrower or guarantor for the creditor's rights under the syndicated loan contract;
(13) Without the approval of the syndicate meeting, it is forbidden to recover the loan in advance, stop the loan, refuse the loan, etc.
(14) It is forbidden to engage in acts that are not conducive to syndicated loans;
(15) Other rights and obligations stipulated in the syndicated loan contract, inter-bank cooperation agreement or other relevant legal documents.
It should be noted that in direct syndicated loans, the lead bank and the correspondent bank are actually equivalent to the participating banks and have special rights and obligations. Therefore, the lead bank and the correspondent bank should not only enjoy unique rights and assume unique obligations, but also enjoy the rights and obligations shared by the participating banks, that is, the lead bank and the correspondent bank should also enjoy and assume the rights and obligations of the participating banks involved in this part.
5. Guarantor and its main rights and obligations
The guarantor in a direct syndicated loan refers to an enterprise or other organization that provides a guarantee to the creditor according to the syndicated loan contract, and assumes the guarantee responsibility for the debtor's debts to the syndicated member banks. In the direct syndicated loan, the guarantee provided by the guarantor can be guarantee, mortgage or pledge, or other forms of guarantee stipulated by law.
The rights and obligations of the guarantor in the direct syndicated loan mainly include:
(1) In case of any relevant circumstances stipulated in the Guarantee Contract, it shall undertake the guarantee liability according to the Guarantee Contract;
(2) After assuming the guarantee responsibility according to the guarantee contract, recover from the counter guarantor or the borrower;
(3) Other rights and obligations stipulated in the guarantee contract or other relevant legal documents.
(two) the legal relationship between the members of the syndicate.
1. Legal relationship between correspondent bank and other member banks
From the rights and obligations of the above-mentioned correspondent banks and participating banks, it can be seen that the correspondent bank and other member banks are actually a principal-agent relationship, that is, the correspondent bank is actually an entrusted agent of a syndicated member bank, and performs the daily management duties of syndicated loans according to the authorization of the member banks, which is often reflected in the clauses on the duties of the correspondent bank in the syndicated loan contract and the inter-bank cooperation agreement. For example, "each member bank irrevocably authorizes the correspondent bank to perform the duties stipulated in this article". In this case, as the agent of each member bank, the legal consequences of the agency behavior carried out within the scope of authorization shall be borne by each member bank of the syndicate, but the legal consequences of the behavior carried out by the agent bank beyond the scope of authorization shall be borne by itself (at this time, the issues of agency by estoppel and bona fide third parties are also involved. If the correspondent bank's behavior constitutes apparent agency, it may have a very adverse impact on other member banks of the syndicate. In order to avoid this situation, we can consider defining the scope of authorization of each member bank to the agent bank in the syndicated loan contract, and at the same time emphasize that the major acts carried out by the agent bank should be issued by the resolution of the syndicate meeting or by other member banks.
As the relationship between the correspondent bank and other member banks is principal-agent, the rights and obligations between the correspondent bank and other member banks should be governed by the provisions of the General Principles of the Civil Law and the Contract Law on entrustment contracts. Therefore, when drafting the clauses of the syndicated loan contract and the inter-bank cooperation agreement on the obligations of the correspondent bank and the participating bank, we can refer to the provisions of the General Principles of the Civil Law and the Contract Law on the entrustment contract to standardize the direct syndicated loan.
2. Legal relationship between member banks
The member banks of direct syndicated loans are linked together on the basis of contracts, so there is a contractual relationship between member banks, mainly including syndicated loan contracts and inter-bank cooperation agreements. The legal relationship of member banks under the above contract has the following characteristics:
(1) All member banks have equal status. The legal status of all member banks in direct syndicated loans is equal, which is mainly reflected in their equal participation in the relevant negotiations of syndicated loans, their sharing of benefits and taking risks according to the loan share, including granting and recovering loans according to the loan share, their right to guarantee and insurance according to the loan share, and their right to vote at syndicated meetings according to the loan share.
(2) The rights and obligations among member banks are relatively independent. The rights and obligations assumed by each member bank in the direct syndicated loan are independent of each other, and there is no joint relationship between them, that is, each member bank independently enjoys the rights and undertakes the obligations under the syndicated loan contract, and the waiver of its rights by one member bank does not constitute the waiver of its rights by other member banks. The failure of a member bank to fulfill its obligations under the syndicated loan contract does not constitute that other member banks have failed to fulfill their respective obligations under the syndicated loan contract, and the corresponding responsibilities shall be borne by the member banks. Unless otherwise agreed in the syndicated loan contract, other member banks will not bear any responsibility for this.
(3) the legal relationship between the members of the syndicate, the borrower and the guarantor.
1. Legal relationship between the member banks of the syndicate and the borrowers.
There is a creditor-debtor relationship between the member banks of direct syndicated loans and the borrowers, which is relative: the member banks have the obligation to issue loans to the borrowers in accordance with the syndicated loan contract, and the borrowers have the right to require the member banks to issue loans in accordance with the syndicated loan contract; The borrower has the obligation to repay the loan principal and interest to the member banks in accordance with the provisions of the syndicated loan contract, and the member banks have the right to require the borrower to repay the loan principal and interest to the member banks in accordance with the provisions of the syndicated loan contract.
In other words, member banks and borrowers actually share the creditor's rights and debts with each other. For the loans that have been issued, the borrower is obliged to repay the principal and interest to the member banks according to the syndicated loan contract, and the member banks have the right to require the borrower to repay the principal and interest to the member banks according to the syndicated loan contract. This part of the loan belongs to the creditor's rights enjoyed by the member banks and can be transferred by the member banks after notifying the debtors. For loans that have not been issued, member banks are obliged to issue loans to borrowers in accordance with the syndicated loan contract, and borrowers have the right to require member banks to issue loans in accordance with the syndicated loan contract. This part of the loan amount belongs to the debt owed by the member bank to the borrower, and the member bank can only transfer it after obtaining the written consent of the debtor and guarantor.
It is particularly important to note that the syndicate in the direct syndicated loan was established after the lead bank accepted the entrustment of the borrower. Therefore, in addition to the creditor-debtor relationship under the syndicated loan contract, there is also an entrustment relationship between the lead bank and the borrower, and the entrustment relationship here should also be adjusted by the general principles of civil law and contract law.
2. The legal relationship between the member banks of the syndicate and the guarantor.
There is a guarantee relationship between the member banks of the syndicate and the guarantor. When the borrower violates the relevant provisions of the syndicated loan contract, the member banks have the right to require the guarantor to bear the corresponding liability for breach of contract according to the different types of guarantees. The guarantor enjoys the right of defense against the member banks except the guarantee contract and relevant laws, and has the right to recover from the counter-guarantor and the borrower after assuming the guarantee responsibility.
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