The syndicated loan - an anchor for mutual trust
Content
Sebastian, you have made use of a syndicated loan in which Helaba is participating. What is the rationale behind this decision?
Sebastian Orth: The syndicated loan is of particular importance for Heraeus because, first and foremost, it defines the scope of our core banks. We work with them on a global scale for our financing needs and all other banking issues. For us, the syndicated loan itself basically has the character of a back-up line, which we currently do not actively use for drawdowns - as was the case with the previous facility. Our syndicated loan is based on a 5+1+1-year structure, which has meanwhile become standard practice. We have expanded the volume of the syndicated facility to 400 million euros and, for the first time, also included an increase option. We were also pleased that all invited banking partners signed up to the agreement and joined the syndicated loan as equal participants. Helaba supported us in this transaction together with a second banking partner as joint coordinator and joint bookrunner, and also assumed the role of agent.
Tim, syndicated loans have become a highly attractive financing instrument in corporate lending. Why is that?
Tim Austrup: For the vast majority of our corporate clients, the syndicated loan is the primary means of securing liquidity. The reason why this form of lending is so popular is undoubtedly the efficiency of the process. At first glance, the credit approval process is similar to any other credit product. What is unique, however, is that collaboration between the customer and the bank, as well as the other banks in the transaction, is more structured and stringent. This distinguishes the syndicated loan from an array of bilateral loans for which different borrowing terms potentially have to be managed. This helps companies' finance departments in bundling the loans from their core banks. That saves time and money. Another advantage is that there is the usual direct dialogue between the customer and their respective bank, while all administrative tasks relating to the syndicated loan are bundled in one contact person. This type of loan is also of interest to large, capital market-oriented customers: They use revolving syndicated loans as a reserve and “proof of liquidity” for rating agencies.
"We appreciate Helaba for ist open and clear communication and the constructive as well as proactive sparring on various topics.“
Sebastian Orth
Head of Group Finance at Heraeus
76 %
of large German companies have a syndicated loan credit line.
About Heraeus:
Heraeus, the technology group headquartered in Hanau, is one of the world’s leading family-owned portfolio companies. The roots of the company, founded in 1851, go back to a pharmacy run by the family since 1660. Nowadays, Heraeus combines businesses in the environmental, energy, electronics, health, mobility and industrial applications sectors.
Sebastian, what motivated you to mandate Helaba for this financing project?
Sebastian Orth: Helaba is one of our core banks with which we have a long-standing business relationship built on a spirit of mutual trust. It has considerable experience and successful references in the syndicated loan market and, following an intensive selection process, was consistently mandated by us as joint coordinator and joint bookrunner. In particular, we appreciate the open and clear communication and the constructive and proactive sparring on various topics.
Have you explored alternatives to syndicated loans?
Sebastian Orth: We already had a syndicated loan, which we were able to further tailor to our needs with this transaction - also thanks to the favourable market environment. But, of course, we are constantly looking at current trends and opportunities in terms of our funding needs. However, the syndicated loan provides us with many advantages for its intended purpose, including the standardised and comprehensive documentation with all of our core banks.
What are the decisive advantages of a syndicated loan from Helaba?
Sebastian Orth: The close cooperation across various financing products that Helaba offers sets it apart from other banks. This enables us to transfer impulses and ideas from specific customer groups and market segments and use them for the benefit of other customers. For example, we are increasingly incorporating the issue of development loans into our syndicated structures. In addition, Helaba is also one of the leading arrangers of Schuldschein loans (SSDs), so that we often coordinate different financing structures. In this cooperation, it is important to me that the client and his syndicated loan transaction are actively supported by the respective transaction structurer for as long as possible.
Sebastian, is an SSD transaction also an option for Heraeus?
Sebastian Orth: Absolutely. The Schuldschein loan is an integral part of our financing repertoire. Even though we currently have no direct financing needs, we are keen to stay abreast of latest trends and maintain our fitness in a wide range of financing instruments. Our aim is to be able to react quickly, competently and together with our banking partners if need be - and, here, access to a wide range of different forms of financing is very helpful.
Know-how
What is a syndicated loan?
- Secured financing thanks to fixed term commitment
- Backed-up character, depending on structure, usually applicable to RCF structures, i.e. guaranteed flexibility
- Stable core banking group
- Documentation regulates rights and obligations, including margin for a specific term
- No subsidised procurement of liquidity unlike with promotional funding
Back to the syndicated loan. How do you combine sensible standardisation with the highest possible flexibility when drafting the contract?
Tim Austrup: That's a very good question, because the syndicated loan requires a certain degree of standardisation in order to be suitable for the entire banking group - for example with regard to drawing options. But syndicated loans are rarely the only financing instrument - so further flexibility can be achieved by having recourse to other lines and instruments, such as bilateral facilities.
Sebastian, what is your assessment of this ambivalence from the customer's point of view?
Sebastian Orth: We don't see this as such a problem and are very satisfied with the structure of our syndicated loan, including the flexibility we were looking for. Even though we have not drawn down any funds from the loan at present, it serves, among other things, as the contractual framework for other bilateral agreements with our banking partners. This significantly simplifies processes relating to contract negotiations for documentation, for example.
„A syndicated loan helps finance departments to bundle the financing from their core banks. This saves time and Money."
Tim Austrup
Head of Loan Markets
The syndicated loan does not necessarily generate strong margins for banks. Why does Helaba offer it anyway?
Tim Austrup: There is no doubt that the syndicated loan market is very competitive. That is why it is entirely justified and reasonable for customers to conclude transactions in this environment that are as competitive as possible when it comes to conditions and structures, for example. For us as a bank, the syndicated loan is thus an indispensable anchor for a reliable partnership with our customers that forms the basis for meeting their additional needs - and they see it the same way. It has to be said, though, that our experience of working with our clients - and this includes Heraeus - is extremely fair. Sebastian and his team take the entire relationship between customer and bank into account when making their decisions and the same is true on our side, too.
In addition to flexibility and good conditions, how important is the team for a successful customer relationship?
Tim Austrup: The team is the be-all and end-all in our relationship with the client, but it is also crucial in terms of team members' market knowledge and transaction experience. Sales, which plays a key role in establishing and maintaining customer relationships, as well as the relevant specialist product departments, work closely together at Helaba and have an excellent overview of the market thanks to the breadth of our activities – a strength that our customers appreciate. Regardless of whether we are talking about major German corporations, international groups, mid-caps or municipally owned companies.
More Stories
A stable partnershipA stable partnership
EWE is one of Germany's largest energy utilities and a long-time Helaba customer. Dirk Eichholz, Head of Corporate Finance at EWE, on working together as equal partners.
