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A loan syndication involves multiple lenders; it is arranged by an agent bank that may also be a lender. Syndication arrangements may involve term debt, revolving debt, or a combination of both. ASC 310-20-20 provides a definition of a loan syndication.

Definition from ASC 310-20-20

Loan Syndication: A transaction in which several lenders share in lending to a single borrower. Each lender loans a specific amount to the borrower and has the right to repayment from the borrower. It is common for groups of lenders to jointly fund those loans when the amount borrowed is greater than any one lender is willing to lend.

A loan syndication differs from a loan participation, in which a single lender enters into a lending arrangement with a borrower and subsequently transfers undivided interests in that loan to one or more other entities. In a participation, the borrower has a legal relationship only with the original lender. See TS 2.3.1.2 for additional information on loan participation transactions.

4.6.1 Loan syndication fees

ASC 310-20-25-19 provides guidance on recognizing syndication fees received for arranging the syndication.

ASC 310-20-25-19

The entity managing a loan syndication (the syndicator) shall recognize loan syndication fees when the syndication is complete unless a portion of the syndication loan is retained. If the yield on the portion of the loan retained by the syndicator is less than the average yield to the other syndication participants after considering the fees passed through by the syndicator, the syndicator shall defer a portion of the syndication fee to produce a yield on the portion of the loan retained that is not less than the average yield on the loans held by the other syndication participants.

As the administrative agent, the lead bank may also receive an annual fee for servicing the loan. This fee should be recognized in income over the period for which it is earned.

PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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