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Banking > IT in Banking > > Features > Internet Syndications

Internet Syndications: Offshore Loans

Syndication of a US$ 75 million Term Loan for ICICI Limited has been launched on the Internet. This is the first Internet-syndication from India and only the second in Asia so far. ICICI itself is widely acknowledged as a pioneer in the use of new technologies and therefore represented the ideal choice for the first such syndication from India. Further, ICICI Limited listed its stock on the New York Stock Exchange in September 1999, making it the first financial institution in non-Japan Asia to have done so. ICICI is also the first Indian financial institution to have done a full scope US GAAP audit of its accounts.

The facility is being arranged solely by BA Asia Limited Hongkong. The five year, bullet loan carries a margin of 80 basis points over LIBOR, which represents the finest pricing so far, for any Indian borrower, after the return of normalcy to the Asian financial markets since the east Asian crisis of 1997-98.

In North America, net has become an efficient and cost-effective medium for syndications of loans and other financial transactions. However, very few loans in Asia have been syndicated on the Internet. IntraLinks Ltd. the world's largest vendor of extranet website dedicated to syndicated loans had completed two Asian loan syndications and is working on four other transactions. First net-syndicated loan in Asia was a $210m, three-year revolving credit facility for Barson Development .

What & Why of Internet Syndication

The first step in syndicating a deal through the net is the establishment of a website specifically for the loan being transacted. Access to such a site is restricted to users who have been assigned passwords by the lead bank, thus allowing terms of the deal to remain confidential.

Deal-specific extranet sites can be created in-house, but banks typically outsource this task to vendors such as from IntraLinks. The use of an established extranet vendor gives comfort to the participants & saves on investment in software & hardware.

In extranet-syndicated deals, all information related to a loan including memos, financials and historical information can be located on a website, allowing invited banks to access, retrieve and organise data more quickly than through traditional media. The information available on each website can be used to prepare in-house credit proposals and can enable prospective participants to respond more promptly to deals.

Further, access to information on the site enables banks to provide quick answers to questions posted by their credit departments, Also the site keeps the participants well informed of deal related developments. It also avoids requirement to provide sensitive information on e-mail.

It also allows arrangers and investors to work on transactions regardless of the time or their physical location and net-based transactions allow for more efficient cooperation between arrangers and investors because participants can communicate simultaneously. Even keeping a track of the visitors to the site & the sections they have visited is possible. This can help in arranger following up with the participants who are not accessing the information.

Syndication on Internet helps on saving on cost & time. Arrangers are not required to spend time in distributing information about deals. Both, arranger & participant saves charges on telephones, faxes, printing and also airfare of their executives. Banks in the US using the net to syndicate their loan are reported to be saving on the syndication costs of as much as 20%.

Internet syndications for loans is expected to skyrocket over the next few years in Asia.

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