Syndicated Loans. An explorative Analysis (PDF)

Master's Thesis from the year 2017 in the subject Business economics - Investment and Finance, grade: 1,3, EBS European Business School gGmbH, language: English, abstract: Modern world finance has seen numerous technologies entering the frame. Therefore, a whole host of new products have been launched in order to obtain advantage in an extremely competitive environment. However, the older products are also developing and becoming ever more global. Syndicated loans and the project finance loans are some of the most common types of large-scale loans in the world. Their main aim is to spread the risk over several entities, and to enable the debtors to obtain large sums of money. Banks are normally the entities providing these loans and they are usually used for various purposes. One special purpose of syndicated loans, which differs from other purposes, is project finance, which is often used for high amount construction or infrastructure projects. In fact, the syndicated and project finance loans have become some of the most important financing instruments for such transactions. The main idea behind both of these types of loans is the fact that the money being given out is too much for an individual bank or corporation, so they are willing to share the risk and the reward. Concerning project finance, the potential debtors get more assurances, since more of the entities are available for them to take out the loan from. This implies that these banks are cooperating with each other, while at the same time, thez are competing for the best possible rates of the provided loans. There is also the problem of the tranches for the companies. These are the actual money available for the companies from the loans. The financial crises in 2008 saw the trust rates fall significantly for the banks over the fact that they were no longer willing to cooperate with the clients due to high risk of defaults. Several imposed policies showed, that this was a serious fear in the financial system. Similarly, the banks were acting in order to protect their shareholders' interests. 2008 - 2016 was a combined period of great uncertainty and it was undoubtedly one of the greatest economic challenges ever faced by the society. The syndicated loan market needed to withstand significant pressure from many influences in order to survive and emerge even stronger than prior to the crisis.