KIC000036 -...

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Unformatted text preview: -----------------------------------------------~ -~-- ---- • Syndicated Bank Loans FIN 428 Prof. Hood Loan Basics Almost every corporation has some form of bank debt. • Many of these firms do not have public bonds outstanding Firms rely on these bank loans for many purposes: - Financing working capital - New investments -CP Backstop ~ Co",,,~\0-1 ~ - Acquisitions Types of Bank Debt Loans are typically divided by the issuer credit quality and the type of the loan. Investment grade vs Leveraged Loans vs Middle Market Lines of Credit (Revolvers) vs Term Loans vs Others Single Lender vs Syndicated Loans • 1 • What Makes Loans Unique? Loans are NOT securities, they are private placements - Rule 144a changed this meaning. Loans are typically secured assets loans are above bonds in seniority ~6-'5'yrs .. Loans are typically have short maturities loans are pre-payable (or callable) £BITOA loans are renegotiated frequently Trt:.·&P loans contracts are restrictive - many covenants LOANS HAVE FLOATING RATE COUPONS 3m UB\:>Q. -;- ~\ '$...,d ~r"n..", Loan Types Revolving Credit Line - Annual Commitment fee - 364 Day facilities (Investment Grade) - GT 364 Day facilities - Swlngllne Amortizing Institutional Competitive-bid M!!ltjClI[rency, Term-out,\Evergreen 1 Term Loan {A} ~.x\:.'\ Term Loan (B, C, & 0) -7 Option, ' ;:'.<2". • Letters of Credit Acquisition/Equipment Investment Lines Grade Issuers Typically these companies have access to external debt markets with relatively low costs. The most common type of loans are revolvers - Seasonal borrowing needs - Backstop CP - Short-term acquisition funding Occasionally IG issuers borrow with term loans, but it's usually cheaper to just sell bonds, • 2 ...
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This note was uploaded on 09/06/2011 for the course FIN 428 taught by Professor Hood during the Fall '11 term at Iowa State.

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KIC000036 -...

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