Leasing firms shore up syndicated lending
Leasing and finance companies have now a sound footing in syndicated lending business because of risk-sharing approaches.
Different industries, from power to telecommunication and textiles, benefit from such financiers.
The data from major market playing firms show a constant rise in such lending over the years. The total syndicated loan arranged by such firms stood around Tk 1,000 crore in 2008.
“Leasing firms have long been involved in clap financing among themselves, but now they tie up with banks for syndication,” said Anis A Khan, managing director and chief executive of IDLC Finance Ltd.
Clap financing is similar to the syndicated loan arrangement made by leasing companies alone.
Syndication of loan refers to granting of a credit to any large corporate customer by a number of banks, financial institutions or nonbank financial institutions (NBFIs). The idea is getting popular because the risk share is collective, say the people close to this business.
The lead arranger, or lead lender usually puts up a proportionately bigger share of the loan, or performs duties like dispersing cash flows among other syndicate members and administrative tasks.
Generally, banks lend on a large scale under a syndication deal, but the NBFIs have now come up with this sort of lending.
Of the 29 NBFIs, five are engaged in such lending.
Industrial and Infrastructure Development Finance Company Limited (IIDFC) and IDLC Finance Ltd are the notable players in the market.
These two NBFIs arranged nearly Tk 600 crore as lead arrangers in 2008. Of which, IIDFC's share is Tk 395 crore and IDLC's Tk 200 crore.
IIDFC arranged Tk 752 crore under five deals in 2007, while IDLC's portion was only Tk 96 crore. IDLC arranged nearly Tk 200 crore in 2006.
These two companies have lent to big projects, such as Warid Telecom (Tk 468 crore), Summit Power (Tk 400 crore) and steel giant BSRM (Tk 136 crore).
The other leasing firms involved in syndicated financing are: Industrial Promotion and Development Company (IPDC), United Leasing and Prime Finance. But the two's contributions are not significant, compared to their rivals IIDFC and IDLC.
“Professional approach is very important for a syndication deal. The lead arranger has to develop a saleable product to a number of lenders, including banks,” said Ariful Alam Chowdhury, head of Structured Finance Unit of IDLC.
Officials of major market players however said the ongoing economic downturn is likely to hurt such financing growth.
“We have a number of projects that have been awarded such finance this year, but investors are taking time to watch the global and domestic financial situation,” Chowdhury said.
ASM Arif, head of operations, Structured Finance of IIDFC, however said some industries textiles and steel -- have already started getting revived. He hoped the situation would improve in the next couple of months.