Business Loan Contracts by yak12997

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									                                                                                                                                 Version 1.5
                                          Syndicated Loan Product Architecture

Contents

Syndicated Loan Product Architecture .................................................................................................. 1
1    Syndicated Loan Product Scope .................................................................................................... 3
2    Syndicated Loan Product Overview .............................................................................................. 4
  2.1 Business Description ............................................................................................................... 4
  2.2 Business Flow ......................................................................................................................... 5
3    Overall Architecture....................................................................................................................... 6
  3.1 Deal Summary ......................................................................................................................... 7
  3.2 Facility Summary .................................................................................................................... 8
  3.3 Loan Contract Summary / Loan Contract ............................................................................... 9
  3.4 Facility Commitment and Loan Contract Position ................................................................ 12
  3.5 Facility Notice Type .............................................................................................................. 13
     3.5.1 Repayment Notice .......................................................................................................... 14
     3.5.2 On-Going Fee Notice ..................................................................................................... 15
     3.5.3 One-Off Fee Notice........................................................................................................ 17
     3.5.4 Rollover Notice .............................................................................................................. 18
  3.6 Pricing Change Notice .......................................................................................................... 19
  3.7 Letter of Credit ...................................................................................................................... 20
     3.7.1 Letter of Credit Issuance ................................................................................................ 21
     3.7.2 Letter of Credit Balance Notice ..................................................................................... 22
     3.7.3 Letter of Credit Amendment Notice .............................................................................. 23
     3.7.4 Letter of Credit Termination Notice .............................................................................. 24
  3.8 Loan Contract Notice Type ................................................................................................... 25
     3.8.1 Drawdown / Rate Set Notice.......................................................................................... 26
     3.8.2 Interest Payment Notice ................................................................................................. 27
  3.9 Lender Position History Message ......................................................................................... 29
     3.9.1 Lender Position History ................................................................................................. 30




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Version

Date           Version   Editor          Comments
16-Dec-2007      1.0     Bhavik Katira   Initial version created.
17-Dec-2007      1.1     Bhavik Katira   Updated to reflect changes after initial coordination committee
                                         meeting.
4-Jun-2008       1.2     Bhavik Katira   Updated to the latest version of the schema together with
                                         annotations. Updated all diagrams to new .png versions.
                                         Trial recommendation version.
2-Aug-2008       1.3     Bhavik Katira   Updated the loan product hierarchy to inherit from Identified
                                         Asset instead of Product.
11-Aug-2008      1.4     Bhavik Katira   Updated the loan contract identifier to summary.
12-Sept-2008     1.5     Bhavik Katira   Overall architecture updated.
23-Sept-2008                             On-going and one-off fee references to loan contract and L/C
14-Oct-2008                              summaries.
11-Nov-2008                              Projected interest amount added to interest rate period.
24-Nov-2008                              Share amounts introduced to loan contracts.
                                         Event id added to Facility and Loan Contract notices.
                                         Rollover notice created.
                                         L/C notices created.
                                         New CommitmentAmount structure added to denote utilization
                                         details for the reconciliation object. Lender reconciliation
                                         message created.
                                         Price change notice created.
                                         Beneficiary can be a simple text rather than party reference.
                                         L/C Balance change notice – added draw flag and change
                                         amount.
                                         Updated LoanContractSummary to contain a choice of original
                                         amount or global and share loan contract amounts.
                                         Updated




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1 Syndicated Loan Product Scope

The syndicated loan business working group collectively decided to focus on designing one-way
borrower-centric notifications for the phase 1 release of the standard. These notifications comprise
most of the manual traffic that both agent banks and lenders must process on a daily basis.

The syndicated loan working group extended FpML to cover:

      Syndicated Loan Notifications between Agent Bank and Lenders, including:

           o Facility Level Notifications
                 Scheduled Principal Repayment Notice
                 Unscheduled Mandatory and Voluntary Principal Repayment Notice
                 On-Going Fee Notice
                 One-Off Fee Notice

           o Loan Contract Level Notifications
                 Drawdown Notice
                 Rate Set Notice
                 Interest Payment Notice
                 One-Off Fee Notice

In order to fully describe the notifications, it was necessary to design the following supporting
object types, all of which are embedded within various notification types:

      „Short-form‟ Product Definitions. These are summary objects which, in the future, will
       form the foundation for defining the „long-form‟ loan product:

           o Deal Summary
           o Facility Summary

      Loan Contract Definitions. These objects describe the value of outstanding loan contracts at
       a given point in time. The outstanding loan balance fluctuates over the life of a facility. There
       are two variations designed: the short-form summary and the long-form version of the loan
       contract:

           o Loan Contract Summary
           o Loan Contract

      Lender Position Definitions. These objects describe the amount of a facility and loan
       contract that a single lender owns at a given point in time:

           o Facility Commitment Position
           o Loan Contract Position




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2 Syndicated Loan Product Overview


2.1 Business Description

A “Credit Agreement” is a legal document which outlines the various financing options available to
the “Borrower(s)” (referred to with the credit agreement). The financing terms are structured within
the document using a set of well-defined products. Within the loan industry a single credit agreement
is referred to as a “Deal”.

Within a deal there are one or more “Facilities”; in effect, each facility is a distinct credit line with
its own notional limit. Within the secondary loan markets these facilities are often referred to as
“Tranches”. In the FpML language, the business group preferred usage of the term, facility.

Each facility can be “Utilized” up its notional limit. Utilization occurs with one or more “Loan
Contracts”. A loan contract is a single instance of an actual borrowing made and is the source for
generating the interest-based cash flows. The sum of the current outstanding loan contracts is what
was previously referred to as the “Utilization Level of the Facility”. The balance of the loan
contracts could be either static, amortizing/increasing over time or fluctuating on an intra-day basis
(depends on the type of facility and the type of loan contract).

Every credit agreement is managed by an “Agent Bank”. The agent bank is responsible for ensuring
correctness of all cash flow to and from the borrower. Syndicated loans of this type are usually
shared between groups of “Lenders”. The agent bank is also responsible for all lender cash flow.




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2.2 Business Flow

The diagram below represents the high-level flow within the syndicated loan product. The notices
are used for communication of various business events by the agent bank to the lender community.

                                                    Agent Bank
                                                  originates Deal




                                                   Agent Bank
                                                 Syndicates Deal




                                              Funded Utilization    Unfunded Utilization   On-Going
                                                                                             Fees


                  Borrower                    Drawdown Notice
                                                                       L/C Issuance




                                                                                              Utilization Fee
               requests a new                                             Notice
                    loan




                                                                                                   Notice
                                                 Rate Set Notice




              Borrower makes                  Interest Payment
                                                                       L/C Fee Notice
                  interest                          Notice
                 payments




                                             Repayment Notice
                                                                        L/C Balance
              Borrower repays



                                                                                                  Facility Fee Notice
                                                                       Change Notice
                   loan                           Breakage Fee
                                                  (One-Off Fee)




                                                                        L/C Balance
                  Borrower                    Drawdown Notice
                                                                       Change Notice
                redraws loan




                                               Rollover Notice         L/C Fee Notice
              Loan Rolls Over
                                                                                              Commitment Fee
                                                                                                 Notice




              Pricing Changes                  Price Change           L/C Cancellation
               Due to Credit                       Notice                  Notice
                Environment




                                                 Deal terminates




                                Figure 1: Loan flow showing notice generation

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3 Overall Architecture

The diagram below provides an overview of the main objects introduced for this version of the
syndicated loan product space.



                   IdentifiedAsset




 Deal Summary                       Facility Summary
                                                                 Loan Contract           Letter of Credit                 Facility
                                                                   (Funded Loan)          (Unfunded Loan)               Commitment
                                                                                                                          Position
        Deal                             Facility                Loan Contract                                          Loan Contract
  (Credit Agreement)                     (Tranche)                                        LC Summary
                                                                   Summary                                                Position




                                                                  Notification
                                                                   Message




                                                                                         Loan Contract                 Lender Position
                       Facility Notice
                                                                                            Notice                     History Message




  Pricing                                                                                                                   Interest
                        Repayment          Rollover        On-going        One-off Fee    Rate Set          Drawdown
  Change                                                                                                                    Payment
                          Notice            Notice        Fee Notice         Notice        Notice             Notice
  Notice                                                                                                                     Notice




                                             LC
LC Issuance             LC Balance
                                         Termination
  Notice                  Notice
                                           Notice




                                                Figure 2: Syndicated loan object hierarchy



The Loan Contract and Facility Commitment Position objects do not inherit from any existing FpML
structure, since they do not fit into existing definitions of any of the base objects.




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3.1 Deal Summary

The Deal Summary is a high-level representation of the credit agreement.




                                 Figure 3: Deal Summary (short-form)




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3.2 Facility Summary

The Facility Summary is a high-level representation of a single facility within a Deal (credit
agreement).




                              Figure 4: Facility Summary (short-form)




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3.3 Loan Contract Summary / Loan Contract

The Loan Contract has been defined in both short and long form. Not all aspects have been captured
in each phase but this definition will expand as the standard progresses.




                             Figure 5: Loan Contract Summary (short-form)

Explanations:
    Although there can be multiple borrower against the loan contract, only the main borrower is
      shown for the purposes of loan contract identification.
    It is important to note that only the original amount of the loan contract is represented. This is
      the only value that remains constant and can be used for identification purposes.


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This object reflects the full details of the loan contract, as currently defined. Embedded within the
loan contract is the current interest rate period (see next page).




                                  Figure 6: Loan Contract (long-form)

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Explanations:

      The loan contract must exist within a given facility/deal.

The loan contract contains a “currentInterestRatePeriod”. This describes the underlying base and
margin rates currently applied to the loan contract. This is core to the definition of the loan contract.




                                      Figure 7: Interest Rate Period

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3.4 Facility Commitment and Loan Contract Position

These objects are used to define the lender position at a given point in time.




                         Figure 8: Facility Commitment & Loan Contract Position




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3.5 Facility Notice Type

This is an abstract object type that defines all fields which are common to facility-level notifications.




                                  Figure 9: Facility notice type base object

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3.5.1 Repayment Notice

This template can be used for scheduled, unscheduled (mandatory & voluntary) notices.




                                    Figure 10: Repayment Notice




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3.5.2 On-Going Fee Notice




                            Figure 11: On-Going Fee Notice



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The on-going fee notification is dependent on the underlying value of the fee margin as well as the
position held by the lender throughout the fee period. The business required us to provide this
information within the Fee Accrual Schedule object, as shown below.




                                   Figure 12: Fee Accrual Schedule




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3.5.3 One-Off Fee Notice

This notice represents the scenario where one-off payments are made by the borrower. These
payments may be associated with a facility or a specific loan contract or L/C level – the fee type will
determine the level.




                                      Figure 13: One-off Fee Notice

The optional loan contract summary provides a possible link for this cash flow to a specific loan
contract.

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3.5.4 Rollover Notice




                        Figure 14: Rollover Notice




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3.6 Pricing Change Notice




                            Figure 15: Price Change Notice
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3.7 Letter of Credit




                       Figure 16: Letter of Credit

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3.7.1 Letter of Credit Issuance

The L/C issuance notice is a simple structure containing the entire letter of credit object to together
with the facility notice header.




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3.7.2 Letter of Credit Balance Notice




                           Figure 17: Letter of Credit Balance Notice


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3.7.3 Letter of Credit Amendment Notice




                            Figure 18: L/C Amendment Notice




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3.7.4 Letter of Credit Termination Notice




                             Figure 19: L/C Termination Notice




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3.8 Loan Contract Notice Type

These notices are actions which take place against a specific loan contract. The loan contract notice
generic type contains either the loan contract summary or full definition of the loan contract.




                                 Figure 20: Loan Contract Notice Type

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3.8.1 Drawdown / Rate Set Notice

This is a notification which alerts the lender community of an upcoming loan contract. The notice
covers only a (vanilla) funded loan.




                               Figure 21: Drawdown / Rate Set Notice
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3.8.2 Interest Payment Notice

These notices reflect the amount of interest due to a specific lender.




                                    Figure 22: Interest Payment Notice
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It is important to highlight the Interest Accrual Schedule associated with each interest payment.




                                  Figure 23: Interest Accrual Schedule




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3.9 Lender Position History Message




                       Figure 24: Lender Position History Message




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3.9.1 Lender Position History




                                Figure 25: Lender Position History




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