The Market Monitor Minding the Nation's Business
The projects of a growing number of firms that are setting up business in the country will be funded via syndicated loans, as the amount needed for them is growing to a level that a sole lender cannot afford to put it up, several investment bankers have said.
In this scenario, the money of banks parked in different investment sites will be thoroughly used for commercial loans, which is the type of loans that command the biggest interest and banks’ main bread and butter.
Renato Diaz, an independent investment banker, said a syndicated loan is usually given by two banks to a client with huge funding requirements.
“Syndicated loans mean a loan provided by two or more banks. Its terms depend on the credit standing of the borrower,” said Diaz, the former president of BIC Investment Corp., the investment house of the Bank of Commerce. The most common clients of banks that approve syndicated loans are big-ticket firms that need at least P500 million in funding.
“It is definitely for big loans. No matter how big a company is, it cannot allot equity to any project worth more than 50 percent (of funding requirements),” the investment banker said.
The syndicated loans market is the dominant way for corporations in the United States and Europe to receive loans from banks and other institutional financial capital providers.
The US market originated with the large leveraged buyout loans of the mid-1980s, and Europe’s market blossomed with the launch of the euro in 1999.
At the most basic level, arrangers serve the investment-banking role of raising investor funding for an issuer in need of capital. The issuer pays the arranger a fee for this service, and this fee increases with the complexity and risk factors of the loan.
The official, who also served as representative of Nueva Ecija province’s first district from 1992 to 1995, said all of the firms that bagged public-private partnership project have entered into syndicated loan agreements.
“The funds needed to complete the project are so big,” he added.
He expects all the 18 big ticket projects under PPP will be financed via syndicated loans due to the very big funding requirements. JERRY MAGLUNOG