After attracting 10 syndicated lenders in half a year, Union Venture Capital closed NT$7.5bn. It was the loan backing for the development of a solar power plant in southern Taiwan. Lenders might face disadvantages. Bills finance firms having a role in loans lending and PF renewal could be the cause.
IBF (International Bills Finance) was originally the lead arranger and bookrunner of this project. It became the first syndicated solar project financing in Taiwan that made the bill finance firm a leader. Next, firms like O Bank and Shin Kong Commercial Bank and the other three put NT$3.7bn overall. Plus, in a combined commitment, five other bills finance companies and IBF took NT$3,8bn.
Concerns about the long-term commitment of bills finance firms made the syndication take time. Invited prospective lenders worried that the bills finance firms rely heavily on the short-term commercial paper with maturities of more than a year to fund themselves. The additional problem would be in the terms of the loan agreement.
Both parties are different. In the loan agreement, bills finance firms would review and extend their commitments to PF only when the commercial paper comes due. On the other hand, bank lenders have nothing to do with that scheme of arrangement relating to their borrowing commitments. So, the borrower will have to repay if the bill finance firms decide not to renew their commitments to the PF.
In this plot, the borrower might encounter a liquidity crash especially during the construction phase when it will not generate cash flows. So, the default probability would be high. The status of bank lenders would be the subordinate of the bills finance firms. Loan bankers knowing the borrowing transaction argued that the bills finance firms could have a chance to ask the borrowers when the commercial paper is due annually.
