Awoonga at a guess I would say that when the deal advanced through central credit and risk management that the bankers who did the term sheet were told they needed to syndicate.
When the term sheet was announced I assumed (and posted this assumption on HC from memory) that the internal approvals at the bank were more advanced than that in order for AVB to be able to announce.
I don't think AVB would have announced that they had a termsheet for 58mill if the syndication had of been known at the time. To my understanding if it had of been known BV would have offered a termsheet that they would lend 30 and act as lead arranger on the remainder so I don't think there has been a miscommunication or a misunderstanding.
My observations on the internal credit process (albeit in Aussie banks) are:
- bankers have an analyst that works with the banker on credit risk and pricing. They do a full DD on the borrower and the project and prepare a credit submission for the deal
- because these analysts are aligned to the banker (and their bonuses are therefore aligned with securing profitable deals) there a separate, segregated/independent central risk management team who have the delegated authority to approve deals proceeding. They will review the credit submission to ensure due process has been followed by the original analyst in rating and pricing the deal. Outside of credit risk specific to the deal they will also assess concentration of risk tolerances (eg how much loan exposure do we currently have across the bank to miners with a credit rating of x) both in dollar terms and also as a percentage of their asset base.
I had assumed step 2 was done or close to done when the term sheet was originally announced but now I suspect it was only step 1 and the syndication was as a result of some of the step 2 decisioning.
AVB Price at posting:
8.8¢ Sentiment: Buy Disclosure: Held
