Financial institution financing contributions
The financial databases do not always include details on the levels of individual financial institutions’ contribution to a deal. Individual bank’s contributions to syndicated loans and underwriting were recorded to the largest extent possible where these details were included in the financial databases. In many cases, the total value of a loan or issuance is known, as well as the number of banks that participate in this loan or issuance. However, the amount that each individual bank commits to the loan or issuance has to be estimated. This research uses a two-step method to calculate this amount. The first uses the ratio of an individual institution’s management fee to the management fees received by all institutions. This is calculated as follows:
Participant’s contribution: ((individual participant attributed fee/sum of all participants attributed fee) * principal amount).
When the fee is unknown for one or more participants in a deal, the second method is used, called the ‘bookratio’. The bookratio (see formula below) is used to determine the commitment distribution of bookrunners and other managers. Bookratio: ((number of participants – number of bookrunners)/number of bookrunners).
Table 1 shows the commitment assigned to book runner groups with this estimation method. When the number of total participants in relation to the number of bookrunners increases, the share that is attributed to bookrunners decreases. This prevents very large differences in amounts attributed to bookrunners and other participants.
Table 1 Commitment assigned to bookrunner groups
Bookratio Loans Issuances
>1/3 75% 75%
>2/3 60% 75%
>1.5 40% 75%
>3.0 <40% <75%*
* In case of deals with a bookratio of more than 3.0, we use a formula which gradually lowers the commitment assigned to the bookrunners as the bookratio increases. The formula used for this:
The number in the denominator is used to let the formula start at 40% in case of a bookratio of 3.0. As the bookratio increases the formula will go down from 40%. In case of issuances the number in the denominator is 0.769800358.