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The syndicated loan - an anchor for mutual trust

Heraeus and Helaba share a long and successful business relation­ship, and the syndicated loan plays a major role here. Reason enough to take a closer look at this popular finan­cial instru­ment. Tim Austrup, Head of Loan Mar­kets at Helaba, and Sebastian Orth, Head of Group Finance at Heraeus Hol­ding, ex­plain why and when it can be useful.

Sebastian Orth, Head of Group Finance at Heraeus Holding
Sebastian Orth, Head of Group Finance at Heraeus Holding

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.

Helaba supports Heraeus in the area of corporate financing and is one of the core banks of the technology group.
Helaba supports Heraeus in the area of corporate financing and is one of the core banks of the technology group.

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.

Interview with Sandra Kam (Corporate Customer Advisor), Sebastian Orth (Head of Group Finance at Heraeus Holding) and Tim Austrup (Head of Corporate Finance).
Interview with Sandra Kam (Corporate Customer Advisor), Sebastian Orth (Head of Group Finance at Heraeus Holding) and Tim Austrup (Head of Corporate Finance).

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

Sandra Kam, Corporate Customer Advisor: "More and more cor­porate custo­mers are placing their trust in our active advisory, structuring and syndication services in syndicated loan business."
Sandra Kam, Corporate Customer Advisor: "More and more cor­porate custo­mers are placing their trust in our active advisory, structuring and syndication services in syndicated loan business."

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.

Produktion Story
Advantage of the syndicated loan: The direct dialogue between customer and bank.
Advantage of the syndicated loan: The direct dialogue between customer and bank.
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