Syndicated Loans. An explorative Analysis

Table of Contents

Table of Figures

List of Abbrevation

1 Introduction
1.1 Background
1.2 Definition of the Problem
1.3 Objective of the Paper
1.4 Methodology and Approach

2 Theory and Practice of Syndicated Loans
2.1 Definitions
2.1.1 Definition of Structured Finance
2.1.2 Definition of Syndicated Loans
2.1.3 Definition of Club Deals
2.1.4 Best Efforts versus Underwriting
2.2 Syndicated Loans Process
2.2.1 Reasons for Syndicated Loans
2.2.2 The Roles of the Parties
2.2.3 Syndication Process
2.3 Characteristics of Syndicated Loans
2.3.1 Types of Facilities
2.3.2 Facilities by Maturity
2.3.3 Currencies
2.3.4 Rating
2.3.5 Pricing

3 Syndicated Loans by their Purpose and the M&A-Market
3.1 Purposes of Syndicated Loans
3.2 Definition of Project Financing
3.3 Risks of Project Finance
3.4 Demarcation from Classical Loans

4 Influencing Factors on the Syndicated Loan Market
4.1 Financial Crisis
4.2 Information Asymmetries
4.2.1 Moral Hazard
4.2.2 Adverse Selection

5 Descriptive Analysis of all Syndicated Loans and Project Finance Loans
5.1 Syndicated Loans and Project Finance by Amount and Tranches
5.1.1 All Syndicated Loans
5.1.2 Number of Tranches
5.1.3 All Syndicated Loans versus Number of Tranches
5.1.4 Project Finance Market
5.1.5 Rating Based Comparison
5.1.6 Average Tranche Value
5.2 Geographical Comparison of Syndicated loans and Project Finance
5.2.1 Geographical Distribution
5.2.2 Geographical Development of all Syndicated Loans
5.2.3 Geographical Development of Project Finance
5.2.4 Conclusion of Geographical Comparison
5.3 Industrial Distribution
5.4 Characteristics of Project Finance versus Other Syndicated Loan Samples

6 Conclusion

References

Table of Figures

Figure 1: Syndicated Loans vs. Bilateral Loans

Figure 2: The Duties of the Participants

Figure 3: Key Steps in the Syndication Process

Figure 4: Term Loans during 2008 - 2016

Figure 5: Revolving Credit Facility during 2008 - 2016

Figure 6: Bridge Facility during 2008 - 2016

Figure 7: Deal Volume Comparison during 2008 - 2016

Figure 8: Share Distribution of Facilities during 2008 - 2016

Figure 9: Most Used Facilities during 2008 - 2016

Figure 10: Maturities of Syndicated Loans

Figure 11: Yearly Changes in Maturity Preferences during 2008 - 2016

Figure 12: Average Share of single Maturities

Figure 13: Syndicated Loans in Most Popular Currencies during 2008 - 2016

Figure 14: Syndicated Loans by Credit Rating during 2008 - 2016

Figure 15: Volume of Syndicated Loans by Purpose during 2008 - 2016

Figure 16: Volume of All M&A Deals vs. the M&A Syndicated Loans during 2008 - 2016

Figure 17: Advantages and Disadvantages of Project Finance

Figure 18: Comparison of Classical Loans against Project Finance

Figure 19: Total Tranches Volume during 2008 - 2016

Figure 20: Total Number of Tranches during 2008 - 2016

Figure 21: Syndicated Loans Compared vs. Number of Tranches during 2008 - 2016.

Figure 22: Volume of Project Finance Deals during 2008 - 2016

Figure 23: Number of Investment Grade and Non-Investment Grade Syndicated Loans during 2008 - 2016

Figure 24: Number of Investment Grade and Non-Investment Grade Project Finance Loans during 2008 - 2016

Figure 25: Average Tranche Value during 2008 - 2016

Figure 26: Project Finance Loans Compared with the Syndicated Loans in different Geographic Locations

Figure 27: Geographical Development of All Syndicated Loans during 2008 - 2016 ..

Figure 28: Geographical Development of Project Finance during 2008 - 2016

Figure 29: Project Finance Loans versus Syndicated Loans by Industry

Figure 30: Characteristics of Different Types of Loans

List of Abbreviations

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1 Introduction

The first chapter of the thesis describes the background, the definition of the problem, the objective of the paper and the methodology, which was used, to collect relevant information and create a resistant master thesis. The topic is extensive, these explanations are necessary to provide an overview.

1.1 Background

Modern world finance has seen numerous technologies entering the frame. Therefore, a whole host of new products have been launched in order to obtain advantage in an extremely competitive environment. However, the older products are also developing and becoming ever more global. Syndicated loans and the project finance loans are some of the most common types of large-scale loans in the world (Brigham & Ehrhardt, 2015, p. 781). Their main aim is to spread the risk over several entities, and to enable the debtors to obtain large sums of money. Banks are normally the entities providing these loans and they are usually used for various purposes (Dennis & Mullineaux, 2000, p. 406). One special purpose of syndicated loans, which differs from other purposes, is project finance, which is often used for high amount construction or infrastructure projects. In fact, the syndicated and project finance loans have become some of the most important financing instruments for such transactions. The main idea behind both of these types of loans is the fact that the money being given out is too much for an individual bank or corporation, so they are willing to share the risk and the reward. Concerning project finance, the potential debtors get more assurances, since more of the entities are available for them to take out the loan from. This implies that these banks are cooperating with each other, while at the same time, thez are competing for the best possible rates of the provided loans (Dennis and Mullineaux, 2000, p. 406). There is also the problem of the tranches for the companies. These are the actual money available for the companies from the loans. The financial crises in 2008 saw the trust rates fall significantly for the banks over the fact that they were no longer willing to cooperate with the clients due to high risk of defaults. Several imposed policies showed, that this was a serious fear in the financial system. Similarly, the banks were acting in order to protect their shareholders’ interests (Culp, 2013, p. 22). 2008 - 2016 was a combined period of great uncertainty and it was undoubtedly one of the greatest economic challenges ever faced by the society. The syndicated loan market needed to withstand significant pressure from many influences in order to survive and emerge even stronger than prior to the crisis.

1.2 Definition of the Problem

While syndicated loans are still commonly used for large-scale projects, it is often claimed that the financial crisis had a major impact on them. This implies that the syndicated loan market was heavily affected because of the financial crisis. It is a likely situation because this loan type requires the banks involved in them to trust each other. Therefore, once the economic crisis came about and there was the fear of the banks defaulting, the banks lost the trust among each other. Furthermore, the debtors were also less likely to obtain the new loans with the fear of the worsening economic conditions and the investments were not paying off (Marcus, 2012, p. 2). Another important part of the master thesis is the comparison of syndicated loans with project finance. Projects can be financed by a syndicated loan or a bond. However, Syndicated Loans are the most used type of lending for this purpose. Therefore, this work doesn’t consider bonds as a financing instrument for projects. Syndicated loans and project finance loans can be compared to the previous decades. There were studies regarding these types of loans previously concerning similar ideas throughout the decades. The comparison of all Syndicated loans and project finance loans are regardless from the amount of the latter, which is much lower. The comparison is made because both types of lending are a syndicated loan, but they have different characteristics. Therefore, it is interesting to figure them out and compare. The main aim of these studies was to identify the dynamics behind the development of these loans. This historical study can be used in order to ensure that the comparison is made with the currently available situation. It may give the indication of interesting coincidences or the developments that have been happening during the period of 2008 - 2016. All of these ideas will later be explained thoroughly in order to grasp the full idea of the direction of the developments that these types of loans have taken. To my knowledge, there have not been any studies in recent years regarding the topic with the observed period of this thesis. Yet, the study could show some of the most important results of the financial crisis of 2008. There have been many academic arguments whether these policies have worked or not and therefore, numerous studies claiming the either. This particular thesis also aims to examine how successfully the governments across the world have managed to adjust to the new realities and whether the syndicated loan and project finance market reflect this development.

1.3 Objective of the Paper

The paper will investigate two main problems regarding the syndicated loan and project finance market:

- How did the syndicated loan and project finance market develop across the world during 2008 - 2016?
- Are the certain characteristics of the syndicated loan and project finance market 2008 - 2016 in line with the existing analysis of 1980 - 1999? And if so, what are the most striking similarities between the two periods?

In order to answer the above given research questions, the paper will be divided into several more detailed sections. They will ensure that the research questions are properly answered.

- How did the financial crisis of 2008 affect the syndicated loan and project finance market across the world?
- How was the syndicated loan and project finance market affected by various government policies aimed at tackling the problems caused by the financial crisis of 2008?
- How does the syndicated loan and project finance market across the world in the period of 2008 - 2016 geographically and industrially?

Overall, the thesis will include all of the important details regarding the topic in order to answer these questions.

1.4 Methodology and Approach

The first few chapters consist primarily of definitions that are needed to create a basic understanding of the syndicated loan. This product is so complex, that many pages could be filled with detailed definitions. However, since this would be against the purpose and structure of the thesis, only the most relevant terms will be explained. In order to get a practical insight into the product, the first chapters also include tables. The data is mainly derived from relevant literature as well as high-quality studies and papers. Since the elaboration observed the period of 2008 - 2016, tables are also included throughout the thesis. They show empirical results of the 9-year period. The aim is to provide the reader with a straight insight into the way individual characteristics of the credit instrument are expressed in numbers. This is necessary, since a syndicated loan has so many characteristics that it is difficult to understand it without visualization. All the empirical data were taken from Dealogic Loanware and evaluated according to the years as well as the individual properties. Dealogic Ltd. is a global company which offers the most reliable data in the market. Hence the reason it was used for this particular study. Companies completing transactions have access to this software and maintain the most up to date information about the deals (Dealogic - About us, 2017). Due to the fact that there are many graphs and evaluations which are differently elaborated, each of these chapters will begin with a description of the approach, methodology, and goal. The period of 2008 - 2016 was chosen for various reasons. Firstly, there is no available evaluation of syndicated loans over the stated period. At the same time, as mentioned before, the syndicated loan Market is evaluated during and after the financial crisis. It is interesting to analyze the ways the market developed and to find out the duration and severity from the effects of the financial crisis in certain regions or industries. The definitions, transaction and deal correspond to the identical meaning.

2 Theory and Practice of Syndicated Loans

The second section describes the main definitions of the product and is divided into two parts. It begins with the definitions and continues with the process of syndicated lending.

2.1 Definitions

The first part explains the category of syndicated loans in the area of financing instruments. It also describes the products three different models: Syndicated loan, Club Deals and Best Efforts vs. Underwriting.

2.1.1 Definition of Structured Finance

In the literature there is no uniform definition of "structured financing", however, there are common characteristics. It is individual, needs oriented and tailor-made financing solutions, which are generated to the respective customer needs. Within the scope of structured financing, the financing requirements are analyzed both, inside and outside the balance sheet of a company or group of companies. This is done to identify approaches of optimization of the financing structure, while taking into account the financing situation. One debt-component of the balance sheet is the syndicated loan. Through the use of a syndicated loan, existing bilateral loans can be bundled into one financing product. This allows middle- to long-term maturities and is usually provided by two or more banks (Guserl & Pernsteiner, 2015, p. 292).

2.1.2 Definition of Syndicated Loans

Syndicated loans are large-volume loans issued by a consortium consisting of at least two credit institutions, often investment banks which offer corporate finance solutions. In the context of granting a syndicated loan, the lenders enter into a single credit agreement, structured in advance by a so-called arranger or mandated lead arranger. The so-called “Bookrunner”, which is often also the “Mandated Lead Arranger”, invites other banks in the syndication process to participate in the credit facility. All banks are equally entitled to redemption and interest payments within the consortium, regardless of the amount of capital (Casolaro et al., 2003, p. 5). Borrowers can be industrial enterprises, banks, insurance companies, public-law entities or special purpose entities. With regard to the structure and duration of the loans, there are no restrictions. However, since the founding of the Loan Market Association (LMA), a standard for syndicated credit documentation has been developed. The LMA offers model contracts or templates for companies which are rated as investment grade or non-investment grade as well as the leveraged buy-out loans. These types of ratings are described in the upcoming chapters. It simplifies the syndication process and makes it easier for the credit institutions to present the credit with regard to the creditworthiness of the borrower. The lenders have the option to make three different forms available - the so-called facilities of the loan. The first is called term loan. Term loans can be utilized within a short period of time and offer the possibility of an ongoing or final repayment. The second form is the Revolving Credit Facility, which can be drawn continuously from the date the contract is signed until the due date. These features are similar to a bank overdraft or a credit line. Number three are Letters of Guarantee Facilities. These also provide the borrower with a line consisting of guarantees, such as delivery guarantees. Section 2 describes the types of facilities in detail. By including a consortium, syndicated loans have characteristics of both, classical bilateral house bank loans and tradable debt instruments (Gadanecz, 2004, p. 75). Similar to bilateral loans, the syndicated loan can be collateralised, including the accrued interest that must be repaid after an agreed maturity (Simons, 1993, p. 46). Borrowers have the assurance that individual banks can not simply get out of the contract. The credit agreement has a clause regulating the conditions that banks can only exit if the majority of banks agree. As a rule, the majority is reached by two-thirds. This is especially important in difficult economic phases, when it is vital that the borrowers have are certain the banks cannot terminate the loan. The documentation is designed according to national law, unless foreign banks are in the consortium or the borrower is in another country or region. In such a case, the documentation is often in English (Hilse et al., 2006, p. 415). Table 1 compares syndicated loans with bilateral loans.

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Figure 1: Syndicated Loans vs. Bilateral Loans

(Adapted from Clifford Chance LLP, n.d., p. 53)

Syndicated loan agreements have an extensive documentation, including covenants. Covenants refer to individual terms in a loan contract. They oblige the borrower to undertake certain actions. Financial covenants enable the lender to terminate the loan prematurely in the event of a violation of certain financial ratios (Miller, 2014, p. 18). Furthermore, the borrower also has the option of negotiating credit terms with the banks separately. It could play against the banks by exploiting the previous relationship with the bank against its competitors. Once a bank offers significantly better conditions than another, there is a risk that the shares of the loan will move. The borrower could increase the proportion of the cheap bank and reduce the share of the lower bank at the same time in order to save interest costs (Mugasha, 1998, p. 11).

2.1.3 Definition of Club Deals

The Club Deals are a form of syndicated loans with almost identical properties. Also, in the case of a club deal, several banks are involved in a single credit agreement. In contrast to the syndicated loan, individual arrangements can be made between the borrower and the individual banks (Lampe, 2014, p. 27). The consortium usually consists of the core banks of the borrower with a business relationship. Club deals have a lower loan amount than syndicated loans. Its volume varied often from USD 25 million to USD 50 million. This type of lending is mostly used by medium-sized companies (Hilse et al., 2010, p. 415). The number of banks within the consortium is smaller, which leads to decreasing costs in monitoring. Club deals are often riskier regarding default because the companies are not large corporations which offer public ratings (Chui et al., 2010, p. 44). Due to the fact that the number of banks within the szndication is so small, there is the advantage of higher accessibility. They are reachable and can quickly agree on the way they should proceed if there is a need for change in the credit agreement, or problems arise regarding borrowers repayment etc.. This is much easier than within a large syndication of high number of banks. The banks often receive the same fees in a club deal provided the size of the loan shares is also identical (Ianotta, 2010, p. 111).

2.1.4 Best Efforts versus Underwriting

The literature distinguishes within syndicated loans, between the so called Best efforts- and underwriting-deals. The majority of syndicated loans fall under the category of Best Effort, which means, that the final amount of the loan depends on each part of the consortium. The borrower might have the risk of losing the desired financing level when capital providers jump out and no bank replaces it. The borrower should first discuss with the potential leading bank a realistic imagination and calculation of volume and terms. However, if the financing level cannot be achieved in the first try, it does not mean the failure of the entire transaction. In this case, various measures, such as higher amounts of the existing banks or adjustments in terms of the transaction can lead to success. In other words, the arranger tries to increase every share on the syndicated loan in order to reach the desired amount. In underwriting deals, lead banks promise to provide the agreed loan amount. The promise is independent from the success of the syndication, which provides financial safety for the borrower. The takeover of the syndication risk is a guarantee of a successful placement of the transaction for the borrower. The leading bank is responsible for finding sufficient participants for the syndicated loan. This guarantee must be paid by the borrower through an underwriting fee. Underwriting deals often take place in company Mergers and Acquisitions (M&A), since this type of transaction usually has to be undertaken very fast, where the borrower has no time for the long syndication process. Besides borrower’s safety, another important advantage is the discretion. Only the leading bank knows of the merger and the details which prevents insider actions. This knowledge also results in asymmetric information because the other participating banks do not have information other than the plan to acquire a certain company (Goeck & Dresp, 2016, p. 181).

2.2 Syndicated Loans Process

This part is about the syndication process and the participants. The second half of this chapter continues with a description of some characteristics of the finance instrument which also gives some insights into the syndicated loan market from 2008 - 2016, through analysis.

2.2.1 Reasons for Syndicated Loans

With regard to banks, the primary objective is risk sharing. Syndicated loans offer banks the opportunity to share credit risks with other banks and reduce the burden of their own regulatory capital requirements (Hoepfner, 2013, p. 730). Smaller banks have the opportunity to participate in large transactions by participating with other banks. They are a part of the financing and can thus come into contact with large companies. Small banks are usually limited in the credit allocation and consider such participation as a chance. In addition, an active management of the credit risk and the credit portfolio can be carried out. (Simons, 1993, p. 45). Another motive is the increase in profitability. Syndicated loans are an attractive source of income, especially when the bank acts as an arranger or agent where it can gain extra fees. Furthermore, this type of lending provides the possibility to sell additional products (cross-selling) as well as start a new relationship with the borrower. By working together with the consortium, banks are able to establish themselves for the long term and strengthen the reputation. If a borrower extends its syndicated loan or simply obtains a new one, it can decide which banks have to be invited to the consortium once again. If the banks have not caused any problems during the period and left a good impression on the company as well as on the other participants, there is a high probability of being invited for further syndicated loan agreements (Jetter, 2014, p. 225). From the borrowers’ point of view, there is the advantage of reducing dependency on one bank. Decisions regarding the credit agreement can only be implemented with a majority vote (Author’s thoughts). The standardization of the contract makes it easier to understand and provide clarity. Another important reason for obtaining a syndicated loan is the possibility to apply for large volumes. It gives the opportunity to make major investments, like e.g.: refinancing, acquisitions etc. In addition, the borrower benefits from the low administration fees. While many banks are in the consortium, the arranger is the only participant which has contact with the company and maintains touch with all the other participating banks (Portisch, 2016, p. 274). Many companies prefer a syndicated loan as opposed to the bond. This preference is due to the cost savings and the effort. The issuance of bonds is a long-term process while granting a syndicated loan is a short process without special requirements. Also, syndicated loans are much cheaper than bonds, despite the enormous fees. It does not require an official rating from a large agency, which is also costly (Altunbas & Gadanecz, 2004, p. 147).

2.2.2 The Roles of the Parties

In the process of syndicated lending, different actors are playing various roles. The two most important participants are the borrower and the lead bank (arranger). Also, agents and participating banks are involved. Before signing the contract, they agree on the terms and conditions, such as credit rate, interest rate and further fees, collaterals, covenants and repayment details (Howcroft et al., 2014, p. 475). Another task of the arranger is to provide relevant information about the borrower to the other banks in the consortium. This function serves to assess the creditworthiness of the company. Before this occurs, the arranger must carry out an adequate due diligence-check of the borrower (Dennis & Mullineaux, 2000, p. 7). The participating banks can be distributed worldwide and have different sizes. They can be large investment banks or smaller saving banks. The credit agreement is signed once all parties have agreed to the terms, which are documented in a term sheet. After that, these banks do not have direct contact with the borrower. The arranger, which often also becomes the agent, acts in the order of the participants. It monitors the relationship with the borrower (Altunbas et al., 2006, p. 256). By controlling the relationship, the arranger or agent gets a lot of information about the borrower, from which it can benefit. This action can increase the risk of information asymmetries between the arranger and the other participants (Bharath et al., 2010, p. 1141 - 1203). More details about Information Asymmetries will follow in chapter 4. The agent is also responsible for the administration and repayment of the loan. For instance, in the case of a secured loan, the agent holds the collaterals and is responsible for monitoring their value. Furthermore, the agent undertakes amendments and waivers during the loan term. A waiver is a cancellation of contract disturbances. It occurs when companies make light covenant breaks but compensate this as soon as possible. Once this is agreed with the lenders, the borrower must pay for it through the so-called "Waiver Fee." In general, the costs for the agency are calculated separately and have to be paid annually until maturity. An amendment is an adaptation of the existing contract. It takes place, for example, when the borrower has improved its credit rating significantly so that the company insists on deleting covenants. If the lenders agree, the agency will take care of the adjustment in the contract. If banks reject this unfounded, there is a risk that the borrower would not invite these banks when it wants to get a new syndicated loan (Dennis & Mullineaux, 2000, p. 409). There may be several agents involved in syndication, e.g. the Documentation Agent, which is responsible for the contract and the collateral documentation. The Security Agent is responsible for the administration, exploitation, and verification of collateral. The facility agent is the sole point of contact for the borrower and all banks in the consortium once the loan contract has been signed (Portisch, 2016, p. 259). Table 2 summarizes the primary duties of the participants briefly:

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Figure 2: The Duties of the Participants

(Adapted from Dennis & Mullineaux, 2000, p. 409 & authors creation)

2.2.3 Syndication Process

The syndication process is essential for an efficient and successful lending of capital. As mentioned above, a syndicated loan is provided by many banks. They have to be clear about the financing structure and the contract to satisfy customer needs. In syndicated loans, the rights and obligations of the banks involved in financing are governed by a consortium agreement. The borrower does not necessarily have to be concerned. The contract negotiations deal only with the domestic relationship among the banks. However, borrowers must be involved in the syndicated loan contract. This agreement governs the rights and obligations of the borrower as well as the entire bank group. The consortium relationship begins with the conclusion of the consortium agreement and ends with the repayment of the consortium loan unless the deal is extended in the same bank group (Portisch, 2016, p. 256). Lending of a syndicated loan consists of three phases: pre- mandated-, post-mandated- and the signing-phase. In the pre-mandated phase, the borrower invites several banks, which are eligible as arrangers. As soon as the banks agree, the borrower can decide, which one should be the arranger. Another variant is the banks' initiative. The banks create a presentation and try to convince the potential borrower that a syndicated loan is the adequate financing instrument. This kind of presentation usually contains indicative conditions and structures (Kimber, 2004, p. 95). The next phase is the post-mandated-phase, where the information memorandum will be prepared for the participating banks, which are selected by the arranger and borrower. The information memorandum provides detailed information on the activities of the company, the industry and the competition. Furthermore, financial ratios are presented, and economic forecasts are made for the term of the credit (Lee & Mullineaux, 2001, p. 8). Later, a meeting between the arranger and the participating banks takes place. They discuss conditions and further details. The participants also can resolve some open questions (Rhodes, 2004, p. 221). This meeting is similar to a road show where the details of the information memorandum can be negotiated. Subsequently, the lead bank discusses the banks to be invited with the borrower. The last stage of the syndication process is the signing phase. It is reached when every party has signed the contract, and the transaction becomes active and binding (Godlweski, 2007, p. 4). The time from the pre-mandated phase up to signing takes, on average, eight weeks (Fight, 2004, p. 25). Transactions with a higher amount of loan can take longer because there are more banks involved. Every bank has to sign the documents, and the arranger or agent has to coordinate the administration. Discussions about the terms and conditions in a large consortium can be time-consuming (Godlewsko, 2007, p. 11). The following graph summarizes the key steps within the syndication phases.

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Figure 3: Key Steps in the Syndication Process

(Adapted and summarized from Lee & Mullineaux, 2001, p. 8 & authors creation)

2.3 Characteristics of Syndicated Loans

The following part presents the second half of chapter 2. It deals with the main characteristics of syndicated loans, as well as practical aspects which are expressed through tables and diagrams.

2.3.1 Types of Facilities

This chapter describes the types of facilities, which can be included in the syndication structure. Syndicated loans consist of different components. The two most common used facilities are term loans and revolving credit facilities. Term loans are comparable to classical bilateral loans. They have a fixed maturity date and repayment modalities. The repayment can be made by equal amounts on the monthly or quarterly basis or in one payment at the end. A term loan has a specified purpose, such as financing Leveraged Buy Outs (Ianotta, 2010, p. 110). If the borrower has various financial objects, which have to be treated separately, the lender can structure more than one term loan. They are called term loan A or term loan B, etc. The key difference between them would be interest rates and duration (Choudhry, 2012, p. 131). The following diagram presents the yearly developments of all term loans during 2008 - 2016.

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Figure 4: Term Loans during 2008 - 2016 (Dealogic Loanware)

During the observed period, term loans had been always the second most used facility in the syndicated loan market (Dealogic data). The sharp fall from 2008 to 2009 could be explained by the harmful effects of the financial crisis. The amount decreased dramatically, by about 33%, from USD 832,000 million to USD 554,222 million. Surprisingly, a successful recovery was possible very soon, in 2010. The amount of all term loans was USD 784,238 million, which made up an increase of 41.50%. 2011 was also successful with a rise of 8.18% up to USD 848,376 million and 2012 suffered a small decrease of 1.66%. An increase could be reached again in 2013, 7.56%. The amount was USD 897,386 million. Additionally, in 2014, the trend could be continued with an increase of 5.28%. The second highest growth after the financial crisis was reached in 2015: 19.93%. The amount was the most senior, USD 1,048,020 million. This level was also stable in 2016. There was a small rise of 1.25%, and the overall amount of all term loans was USD 1,061,123 million. The average share of the observation period was 24.12%. This number is almost one fourth and confirms, that term loans are a popular facility within syndicated loans. Revolving Credit Facility: A Revolving Credit Facility can be compared with a flexible overdraft line in bank accounts. The borrower can withdraw and repay during the loan term within the agreed amount. Its maturity is often short, and borrowers use the flexibility of this facility for short-term financial objectives, such as refinancing of drawn lines in other banks. Many banks use this type of facility, to sum up, their bilateral credit lines. Most of the companies have five or more banks with bilateral credit lines and various conditions. By summing them up and converting into a Syndicated loan Facility, the borrower has the same conditions for the same product and only one contact bank - the arranger of the syndicated loan. Another advantage is the safety of the borrower because no bank can cancel its commitment without the approval of the majority banks. Nonetheless, if a company is not using the revolving line, it has to pay the annual facility fee, since the bank is spending its resources for providing the service (Ianotta, 2010, p. 110). Concerning the various facilities, it is interesting to analyze, which instrument types are used most frequently. The next diagram shows the yearly amounts of all Revolving credit facilities during 2008 - 2016 in order to determine how this facility has developed over time.

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Figure 5: Revolving Credit Facility during 2008 - 2016 (Dealogic Loanware)

The facility of revolving credit lines was the most used syndicated loan product in every year of the observed period (Dealogic data). The amount in 2008 was USD 1,162,225 million. One year later, the amount decreased sharply by 28.12% to USD 835,415 million. Similarly, this negative development was a result of the financial crisis. In 2010, there was a dramatic increase of USD 1,449,583 million. It becomes clear that a recovery took place very quickly. 2012 was also successful due to the rise of 60.24%. 2010 and 2011 showed an above average increase of revolving credit facility. Compared to 2008, the total amount almost doubled until 2011, which is remarkable. Mainly because of the financial crisis within this period. In 2012, the facility had to suffer a decrease of 28.88%, and the amount was USD 1,652,028 million. A turnaround happened in 2013 through an increase of 20.99%. One year later, there was also an increase of 16.59%, and the total amount was USD 2,330,286 million, which was very close to the amount in 2011. The next year, 2015, revolving credit facilities fell by 8.41% to USD 2,134,197 million. In 2016, there was another decrease of 12.29%, and the overall amount was USD 1,871,915 million. Bridge financing is short-term and provides intermediate or pre-financing for certain transactions. These can include company acquisitions or project financing. As financial resources are required before the deal is finalized, some borrowers need bridge financing. In the context of company acquisitions, the financial resources must be available quickly and serve as spontaneous pre-financing. During the process of bridge financing, the lender can create a concept of final funding, since this is often not known beforehand. The concept is known more as pre-financing (Stowell, 2012, p. 236). From these characteristics, it can be concluded that this form is only suitable for companies with an excellent credit rating, as the banks are paying in advance before the repayment is even committed. It is also clear that this form could be used as a further facility, particularly in the case of company acquisitions and project financing because the process needs to be financed over a period.

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Figure 6: Bridge Facility during 2008 - 2016 (Dealogic Loanware)

Over the observed period, bridge facilities were used in different frequencies. Their usage was not always on the same rank like term loans or revolving credit facilities. In 2008, the amount was USD 212,449 million. In the year as the financial crisis affected the syndicated loan market negatively (2009), the amount of bridge facilities decreased by 61.20%. This adverse development was by far the worst. Surprisingly, this facility was not able to recover within a year. There was just a small decrease of 0.36%. Compared to term loans or revolving credit facilities, which could heal quickly, bridge facilities had to suffer one year longer. However, in 2011 there was a high increase of 81.54%, and the total amount was USD 154,045 million. This percentage of growth was much higher than the most senior development of the other two facilities. Another raise could be reached in 2012 (14.03%) as well as in 2013 (19.89%). In 2014, the bridge facility reached USD 355,828 million, which made up an increase of 68.96%. In 2015, the record in the observed period was achieved through the total amount of USD 432,764 million, which made up a rise of 21.62%. In, 2016 the number fell sharply to USD 341,765 million. Since bridge facilities could be associated to other markets, such as activities of M&A- transactions, it is necessary to compare these changes and developments during 2008 - 2016 to determine whether an association exists between the two numbers. The next graph shows the yearly changes of the total deal volume of M&A transaction, as well as of the bridge facility.

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Figure 7: Deal Volume Comparison during 2008 - 2016 (Dealogic Loanware & The White Case M&A Analysis)

On the graph, it is possible to see that the developments of both volumes are different in the beginning. The literature says that bridge facilities are often connected with M&A transactions. However, the events in 2011 show significant differences, which acts as a counterexample for the hypothesis. The M&A market increased by 8.56%, while the bridge facility increased by about ten times more (87.54%). After 2012, both lines are always facing similar direction. Even if the changes in percentage are different, the trend was the same for the whole period, except 2010, where the bridge facility had to suffer a slight decrease. Another noticeable aspect of the graph is the difference between the percentages. It is remarkable that the differences between both lines were getting smaller over time from 2012, compared to the years before. These differences can be seen in the table above where the gaps are listed. While the difference in 2011 was dramatically high (78.98), the next years showed a decrease which could be a sign for an association between the M&A deal- and bridge facility-volume. Especially in 2015, the development was identical since the difference accounted for just 0.05. The following year also had a small deviation of 3.49. Overall, through this comparison, there is no clear evidence for coherence between M&A deal volume and bridge facility volume. Nevertheless, it can be concluded that the directions are almost always identical and that the differences in 2015 and 2016 were minimal. So there might be the coherence in the last years of the observed period, but this is not enough statistical evidence for the conclusion. The diagram below shows the share of the revolving credit facility, term loan, and bridge facility compared to the total volume of syndicated loans during 2008 - 2016, in order to see the proportion of the single facilities within a syndicated loan.

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