AGENT BANK’S DUTIES TO SYNDICATED LENDERS

The huge developement of economy and trade in the last decades of twentieth century, with the subsequent rise of a strong worldwide competition beetween companies, has made the global economic environment best suitable for biggest companies, i.e. only those which, enjoying a broad network and scale economies, can compete.

This has started an increasing number of mergers and acquisitions, in Australia and overseas: in order to complete such big financial operations, an increasing amount of money was needed by corporations. Being such amount so huge that it was impossible (and too risky) for just one bank to provide it all by itself, it was necessary for banks to arrange loans pooling their resources, their money: it was the beginning of syndicated loans, a peculiar expression of modern economy. It’s a loan arranged with moneys provided through a fund made with contributions by a variable number of banks.

The first question that, besides economic issues, is legally relevant about that is: “What is a Syndicate?”.

A first, descriptive, definition can be:“a syndicated loan involves an agreement by a number of banks (the “syndicate”) to lend money or provide other financial facilities severally to a borrower”[1]. An important role in the building of a Syndicate is played by the so called arranger bank: it has, at the beginning, the duty to act for the interest of the borrower finding other financial institutions willing to take part to the pooled fund and to set the clauses of the contract which will rule the whole operation; after the conclusion of the agreement, its role change, becoming it the so-called Agent Bank, the one which manage the everyday relations with the borrower, acting for the best co-lenders’ interest.

This is still not satsfactory: as a matter of fact the syndicate’s legal characterisation is crucial in order to understand which is the legal relationship existing between its members.
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