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When you negotiate a syndicated credit arrangement with a group of banks, especially if your corporation has a low rating or is going through rocky times, the partners you start with may not be the partners you'll have in the future. And those new partners may not be your best allies.
While most bank lenders and investors in bank loans are likely to share management's long-term goals for recovery and profitability, others may seek to manipulate your company or the loan for their own profit. When setting up a facility where loan participations may trade in the secondary market, seek covenants to protect yourself from disruptive creditors.
Most large banks join syndicates with the idea of holding a piece of a profitable loan to maturity, but the growing secondary market for loan participations and the chance that your performance or theirs might be derailed raise the possibility that part of your loan could be snatched up by a "vulture fund."
These funds …