Syndicated Financing

Syndicated loans involve a lead bank, often called the arranger or agent, which manages the loan process. They may contribute a significant share of the loan and handle tasks like cash distribution.
The main purpose of syndicated lending is risk diversification, spreading borrower default risk across multiple lenders, including institutional investors. These loans are crucial for funding large transactions, such as leveraged buyouts, primarily with debt.
Syndicated loans can be best-efforts, meaning the borrowed amount may vary if enough investors aren't found. They can also be split into dual tranches for different types of investors.
Interest rates on these loans can be fixed or floating, often linked to benchmark rates like SOFR, a dollar-denominated rate derived from Treasury repurchase market transactions.

Best Efforts Syndication: With a best-efforts deal, the lead bank does what it can (by using its best efforts) to arrange a syndicate for a loan. This lead, however, isn't obligated to make any loans, including in its entirety, to the borrower itself. Rather, it acts as an agent to approach other lenders to come together to finance the loan. Best efforts loans are commonly used when borrowers have poor credit histories and/or when the economy is tough
Club Deal: Club deals typically involve loans of less than $150 million. These loans are usually meant for a small group of lenders—usually those with existing relationships with the borrower. The lenders involved in this type of deal normally have an equal share of the loan, including the interest rate and fees.
Underwritten Deal: An underwritten deal is fully guaranteed by the lead bank. If no other bank gets on board, then this institution is fully responsible to finance the loan. It may try to get investors later on down the road as an option to spread out the risk.