Should South Bank offer a lower rate or more lenient loan terms to compete for a $120 million working-capital facility agreement with a telecommunications corporation?
In this case, imagine being in the position of Yousuf Omar, a relationship manager at SouthBank (SB) whose longtime prospect, DSC Communications Corporation, has asked SB to bid as the agent bank on a $120 million working-capital facility. This could be an ideal client given the opportunity for significant credit and other business in the years ahead. To win the bid, however, Omar must be willing to recommend to his superiors that the bank aggressively pursue the deal by offering a lower interest rate or more lenient security and covenants for
the loan than its rival bank has offered.
Questions:
1. What are the major industry risks faced by the banks choosing to participate in the working-capital
2. facility?
3. What are the major company-specific risks faced by the participating banks?
4. Can the loan be structured to mitigate the identified risks?
5. Under what circumstances, if any, would you recommend that SouthBank bid for the loan
Attachments:
1. Case Study
2. Notes on term loan negotiations
3. Noted