NEW SYNDICATE LOAN RULES PERPLEX EXPERTS

China's Guidelines on Bank Syndicate Loan Business, promulgated by the China Banking Regulatory Committee on August 11 2007, and effective as of the date of issue, may give banking lawyers more questions than answers.

The guidelines clarify the role of lead banks, participating lenders, fee structures and the type of projects eligible for loan syndication. According to the guidelines, the lead bank should be responsible for at least 20% of the total loan syndication, while participating banks should altogether share at least 50% of the total loan. If a credit facility is arranged by a sole arranger, the arranger must hold between 20% and 50% of the debt after syndication.

While the rules bring clarity in the above respects, they also cause confusion by putting an unusual amount of responsibility on the arranger, such as the provision requiring the arranger to ensure the ¡°truthfulness, completeness, and accuracy¡± of all information included in the information memorandum – which is the opposite of normal international banking standards, in which the borrower is typically given such responsibilities.