temporary association of investment bankers brought together for the purpose of selling securities; also called purchase group. One investment banker in the group, usually the originating house, is selected to manage the syndicate. There are two types of underwriting syndicates, divided and undivided. In a divided account, the liability of each member investment banker is limited in terms of participation. Once a member sells the securities assigned, that investment banker has no additional liability regardless of whether the other members are able to sell their portion of the security or not. In an undivided account, each member is liable for unsold securities up to the amount of its percentage participation irrespective of the number of securities that investment banker has sold. Most syndicates are based on the undivided account arrangement.
- Banking. Project financing common in the Eurobond and Euronote markets, and also in the United States, whereby a group of commercial bankers and investment bankers each agrees to advance a portion of the funding. Typically, the financing is arranged by a single bank at narrow interest rate spreads above the lender’s cost of funds. The syndicator acts as investment manager, collecting a loan origination fee or commitment fee from the borrower, and arranging for the sale of Euronotes to other banks in the group. Typically, the syndicator keeps only a small portion of the total financing, generally less than 10% of the total value of the loan.
The syndicated loan differs from a loan participation because the syndicate members are known at the outset to the borrower. Syndication also separates the lead banker from the group of financial institutions that ultimately fund the obligation. See also Note Issuance Facility; Revolving Underwriting Facility; tender panel.
- Securities. A group of investment bankers who purchases a new offering of securities from an issuer for resale to the investing public at a fixed price. Also called the purchase group or underwriting group. Operating rules of the investment syndicate, led by a managing underwriter, are spelled out in the agreement among underwriters. The purchase group, which may include commercial bankers, differs from the selling group.
- Investments. The purchase of shares in investments promising tax avoidance, or reinvestment of earnings without paying income taxes, usually through limited partnership participations in real estate, oil and gas exploration, and so on, sold through an investment syndicate or a broker-dealer. The Tax Reform Act of 1986 sharply curtailed so-called passive losses in tax shelter investments.
group of individuals or companies who have formed a joint venture to undertake a project that the individuals would be unable or unwilling to pursue alone. A syndicate may be treated as a partnership or corporation for tax purposes.
group of insurers or reinsurers involved in joint underwriting. Members typically take predetermined shares of premiums, losses, expenses, and profits. Syndicates, more common in reinsurance than in primary insurance, are formed to cover major risks that are beyond the capacity of a single underwriter.
- sell or distribute a television program or series to one or more local stations. Syndicated programs include reruns of former network presentations, made-for-TV movies, and film presentations.
- group of newspapers, such as the Hearst chain, owned or managed by the same person or company.
- sell or distribute a newspaper supplement or feature column to a number of publications for release at the same time.
- offer for sale the findings of a research company. Syndicated research services conduct research in the areas of consumer and product information, broadcast audience composition, magazine and newspaper readership, and product usage, and then sell their results to various clients on a subscription basis.
- sell or distribute mailing lists. (Syndicated mailings are used by a company that will prepare letters, brochures, and pamphlets about its products and then turn over these materials to another company that specializes in mailing materials to prospects from its own prepared lists.)
- sell or distribute artwork to advertisers, advertising agencies, or others who use artwork in their advertising; a syndicated art service.