LFC can offer loans to its clients on bilateral basis or jointly with other lenders.
Syndicated and bilateral loans are a form of direct lending in which one or more lenders provide financing to a borrower under terms and conditions set out in a facility agreement.
The main difference between syndicated and bilateral loans is that a syndicated loan is an arrangement between an individual borrower and a group of lenders, while a bilateral loan is an agreement with only one lender. This primary difference means that syndicated loans are typically used by businesses to gain large amounts of financing. Bilateral loans usually used by small business owners looking for initial capital or funds to expand.
Two types of loan facility are commonly utilised: term loan facilities and revolving loan facilities. Under a term loan facility, the lender commits to lend to the borrower a specified amount of money over a set period of time (the "term"). The period of a corporate term loan is generally between one and five years. The loan may be repaid in instalments (in which case the facility is commonly described as "amortising") or through one payment at the end of the facility (in which case the facility is commonly described as having "bullet" repayment terms). Prepayment of the loan is commonly permitted without penalty. A revolving loan facility is similar to a term loan facility in that it provides a borrower with a maximum aggregate amount of capital, available over a specified period of time. However, unlike a term loan, the availability period usually extends for almost the entire life of the loan, allowing the borrower to drawdown, repay and re-draw all or part of the loan at its discretion
LFC can offer bilateral loans to its clients or participate as lender in newly structured syndicated loans jointly with third parties (mainly financial institutions).
Both syndicated and bilateral loans normally give to the lender the right to assign or transfer its rights, benefits and obligations in the loan to a third party. Transferability is a key feature as it allows investors like LFC to purchase participation in loans even after the loan agreement has been signed, through the secondary loan market.
Most of the loans originated and purchase by LFC are structured under standard LMA or LSTA terms and conditions and governed by the laws of England or New York. The Loan Market Association (LMA) has as its key objective improving liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa (EMEA) and LSTA shares the same objective in the American loan market.
LFC execute transactions through direct assignment, funded risk participation or silent confirmation and using market standard documentation such as LMA and BAFT