Mandated lead arranger

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Financing for a major financed project will be arranged by a bank or group of banks termed the “lead arranger(s)”.

The mandated lead arranger (MLA) generally has the leading role in this financing stage of a project. He often underwrites the financing, then handles syndication or builds up a group to underwrite the full amount and syndicate. As a requirement of its mandate from the project sponsor, the MLA will be committed to raise the complete debt financing, which for a major project could be many hundreds of millions of dollars. But, commercial lenders typically do not want to take more than about US$50 million of debt for a particular project and will want to pass some of the debt, and hence some of the risk, to other lenders. The process of selling the debt is called syndication.

In large deals with multiple tranches, there may be an arranger for all, or there may be a separate arranger for each tranche. During the syndication process one of the banks may fulfil the role of book runner. This role of the book runner is simply to keep a record of how much debt each of the potential syndication banks wants to take.

The MLA is paid either through an arranger fee, through skimming or through structuring fees.

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