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Credit Risk Evaluation of a Bridge Loan

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Using the example of the acquisition of Syngenta by ChemChina in 2016/17, the case highlights the credit, legal and regulatory risks associated with a complex cross border acquisition finance transaction from a lenders point of view. The case focuses on the credit risk of a short-term bridge loan that is established to enable the borrowing group and its financial advisors to structure a long-term financing solution.

Such transactions are typically structured using various special purpose vehicles (SPVs) in different jurisdictions. The complex structure of the transaction, crossing several jurisdictions and regulatory environments, requires the credit analysts to consider not only financial risks but also non-financial risks such as the questions of enforceability of the lender’s claims.

 

Learning Objective:

  1. Provide students with a basic understanding of how counterparty risk is evaluated in real life example.
  2. Examine the issues facing a bank when deciding on a complex credit request under incomplete and uncertain information.
  3. Learn how to summarize and present a complex credit risk proposal to the senior management of the bank for decision.
  4. Understand the typical best practice risk governance in a bank.

 

Year of Publication: 2021
Ref. No.: 21/699C
Discipline: Accounting & Control, Finance & Investments
Industry: Banks & Diversified Financials
Country: China (People's Rep. of), Hong Kong SAR
Company: China National Chemical Corporation, Syngenta AG.
Languages: English
Pages of Text: 6