Explore BrainMass
Share

Financing foreign operations - syndicated loan

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

Citibank offers to syndicate a Eurodollar credit for the government of Poland with the following terms:

Principal U.S.$1,000,000,000
Maturity 7 years
Interest rate LIBOR + 1.5 percent, reset every six months
Syndication fee 1.75 percent

a. What are the net proceeds to Poland from this syndicated loan?
b. Assuming that six-month LIBOR is currently at 6.35 percent, what is the effective annual interest cost to Poland for the first six months of this loan?

© BrainMass Inc. brainmass.com March 21, 2019, 11:12 am ad1c9bdddf
https://brainmass.com/business/finance/financing-foreign-operations-syndicated-loan-37459

Solution Preview

a. Syndication fee is the money paid to the bank for arranging the loan. In this case the loan amount is 1,000,000,000. The free is 1.75% of the loan amount and comes to 17,500,000. Since this amount ...

Solution Summary

The solution explains how to calculate the net proceeds of a syndicated loan in eurodollars and the effective cost of the loan

$2.19