Consortium business
Syndicate are banking transactions from banks that do not own but this, as part of a consortium to carry out their banking customers.
Legal bases
According to German law, the credit institutions combined in a consortium form a company under civil law (GbR or BGB-Gesellschaft) according to § § 705 ff. BGB. The joint management and representation (§ § 709 , § 714 BGB) is regularly waived in the consortium agreement and transferred to a consortium member. A consortium of this type can be organized as an internal or external consortium, depending on whether the bank customer is informed about the establishment and the members of a bank consortium or not.
The external consortium enters into contractual relationships with the bank customer as such, with the consortium leader also acting on behalf of the consortium with regard to the bank customer. In the case of the internal consortium, the lead manager acts exclusively in his own name, but for the account of the consortium banks, which are made known to the bank customer in the open internal consortium. In the case of the internal consortium, legal relationships also only exist between the bank customer and the consortium leader. The form of the internal consortium is often chosen so that, after the consortium agreement has been concluded, the group of consortium banks can be autonomously changed without the involvement of the bank customer. Only as an external consortium does it enjoy legal and party status and can thus become the owner of a claim or debtor of the bank customer. In deviation from Section 709 of the German Civil Code (BGB), the management authority rests with the consortium leader, which at least includes conducting negotiations with the bank customer. According to the case law of the BGH, the consortium banks are ancillary liability for breaches of duty by the consortium leader. This external liability can be divided into the internal liability within the consortium in the consortium contract. For the internal relationship between consortium and the underwriters the rules apply on the agency agreement (§ 675 § ff. BGB). In the case of a centralized consortium, the business is handled by the lead manager, who invoices proportionately internally with the syndicate banks, which is why the internal consortium is regularly run as a centralized consortium. The sole creditor of the claims and sole debtor of the services is in both cases the lead manager, so that the bank customer only has to balance a single claim / liability against this.
species
The most common types in syndicated business are the issuing of securities (issuing syndicate ), the granting of loans ( syndicated loan) or the joint management of loan collateral within the framework of a collateral pool .
Issuing consortium
The issuing consortium carries out the issue of securities (in particular shares or bonds ; IPO ) for an issuer as part of the agency by placing them on the capital market or holding them in its own portfolio. The consortium advises and supports the issuer in the various phases of the issue. The first phase is the needs assessment, which is followed by the preparation of the prospectus. Thereafter, the admission procedure for the securities to be issued is carried out in cooperation with the relevant stock exchange, supervisory and settlement agencies. In Germany, these are in particular Deutsche Börse , BaFin and Clearstream . If the consortium and the issuer submit the application for admission to the stock exchange, it assumes full prospectus liability; in the internal relationship with the issuer, a claim for indemnification from liability as the initiator of the prospectus is then regularly agreed. After approval, the placement finally follows, for which the issuing consortium can use the stock exchange, private placement (direct sales via the branches of the consortium banks) or transfer to its own portfolio as distribution channels . The syndicate quotas are based on the individual placement power of each syndicate bank.
Syndicated loan
Main article: Syndicated loan
The bank consortium joins forces for the purpose of jointly granting a loan to a borrower . A distinction can be made between the phases of needs assessment and needs-based adjustment of the loan amount, loan types and loan periods (so-called financial engineering ), drawing up the loan agreement and its implementation. In contrast to the underwriting syndicate, the syndicate banks will usually keep the syndicated quotas they have taken over in their own portfolio, so that they can calculate the credit risks to be taken before they join the syndicate . Although syndicated loan agreements usually contain an assignment clause, this often makes the resale of loans on the secondary markets ( loan trading ) dependent on the consent of the lead manager or even the borrower. Due to the lack of alternatives to the own portfolio compared to the underwriting consortium, the decision-making processes for syndicated loans in banks usually require more time than for the underwriting consortium.
Members of the consortium
The consortium is structured strictly hierarchically. The consortium leader, who usually also takes on the higher syndicate quotas, leads the syndicate banks.
Consortium leader
The ( sole mandated lead arranger ) or the joint mandated lead arrangers , as primus inter pares, take on the coordination between the consortium and the bank customer, both in drawing up the consortium contract and in handling the consortium business. Contrary to Section 709 of the German Civil Code (BGB), he is responsible for the sole management authority, which at least consists of conducting negotiations with the bank customer.
Syndicate banks
Depending on the size of the consortium, the consortium banks can be divided into lead arrangers , arrangers , managers , co-lead managers and mere participants . This hierarchical structure is only related to the consortium quotas taken over from the consortium business and otherwise has no legal effects. The syndicate banks assume a certain percentage of the total volume of the syndicated business, the so-called syndicated quota. In order to limit the liability of the consortium banks to their consortium quotas, an express limitation of liability in the consortium agreement is necessary, whereby an externally identified regulation in the internal relationship is not sufficient.
Sales agents
Some banks that act as sales agents are also part of the consortium . However, these do not have an underwriting function and must therefore still be placed below the co-managers . Sales agents are, so to speak, sales cooperation partners. B. as a direct bank distribute a comparatively small part of the shares to private customers.
Consortium reservation or underwriting
A (strict) syndication or syndication reservation by the lead manager is subject to the condition that the final amount of the placement volume of securities or the final amount of the loan depends on the consortium shares to be taken over by the consortium banks ( best effort ). The lead manager makes the placement of an issue or the granting of a syndicated loan dependent on the consortium's existing consortium commitments. If the planned loan amount or the planned issue volume is not achieved, the consortium agreement will either not be concluded or only in the amount of the consortium commitments made / the volume placed. In this case, issuing syndicates (securities) are issuing syndicates that are subject to the regulation of section 1 (1) sentence 2 no. 4 KWG (finance commission business). With underwriting, on the other hand, the lead manager undertakes to provide a precisely defined loan amount or to take over the entire issue amount (hence also: takeover consortium), without the entire consortium shares of future syndicate banks being important; The lead manager and / or the consortium runs the risk of having to represent, place or take over the entire loan amount or the entire issue alone in the worst case. For regulatory purposes, underwriting is considered an issuing business in accordance with Section 1 (1) Sentence 2 No. 10 KWG.
Purpose and goals
Consortia are set up for consortium transactions if the placement volume or the loan amount is too large for a single institution ( large loan pursuant to Section 13 KWG) or if this would result in too one-sided business risks ( cluster risk ) for an individual institution . This risk is reduced by distributing it to various banks that are not affiliated with the group. The consortium is thus an essential instrument for risk diversification. A consortium saves the bank customer from having to establish a large number of business connections with different banks with possibly different conditions, because he only has to communicate with the consortium leader and receives uniform conditions. Once the consortium is finally settled, the purpose of the consortium for which it was formed also ends.
literature
- Bernhard Steinrücke, Herbert Scholze: The syndicated business of the German banks , Duncker & Humblot, Berlin 1956, ISBN 978-3428014644
Individual evidence
- ↑ BGH NJW 1991, 2629.
- ^ A b Dorothee Einsele, Banking and Capital Markets Law: National and International Banking Transactions , 2006, p. 311.
- ↑ BGH NJW 2001, 1056.
- ↑ a b Peter Derleder / Kai-Oliver Knops / Heinz G. Bamberger, Handbook on German and European Banking Law , 2003, p. 457.
- ^ A b Herbert Schimansky / Hermann-Josef Bunte / Hans-Jürgen Lwowski (Hadding), Banking Law Handbook , § 87 marginal number 34.
- ↑ BGHZ 146, 341, 343 ff.
- ↑ Jürgen Ellenberger, prospectus liability in securities trading , 2001, p. 26.
- ↑ Francesco De Meo, Banking Consortia , 1994, p. 151 f.
- ↑ BGHZ 142, 315.