The word "syndication" is termed as an act to bring something together. In finance, syndication is the process where a group of lenders work together in the funding of debt for a single borrower.

Bonds that are underwritten by a group of underwriters are called syndicated bonds.

Underwriters are the banks that raise capital for a client( corporation, government, or institution) from the investors in the form of debt. This process is called Underwriting.

Syndicated bonds are the most common way to sell debt which is used mostly by companies, governments, and other organizations because as the size of the debt increases banks prefer to share the risks with other banks rather than a bilateral issuance. It reduces the time and effort of the issuer of not meeting each lender to negotiate the terms of the debt. Under syndication, the companies find it easy to pool the funds and share risks.

Stages of the syndication process

Pre-launch- The issuer considers preliminary matters and decides what type of bonds to issue and how to structure the issue of the bonds.

Launch and roadshow.- The lead bank announces the bond publicly and promotes prospective investors to buy the bonds once they are issued.

Issue- This consist of two stages:

Signing- The managers sign the agreement confirming to subscribe to the bond.

Closing- The trust deed is signed and the bond instrument is created. Investors receive the bond agreement in return for payment of the purchase price of the bonds.

Post Issue- Under this stage, the bondholders are paid interest until the tenor of the bond.

Parties involved in the syndication process:

Lawyers- The lawyers draft all the necessary documents and prepare legal opinions.

Lead manager and managers-It consists of financial institutions that arrange the entire transaction, including the sale of the bonds, legal documentation, and settlement procedures.

Paying agents-It consists of financial institutions that act as agents of the issuer in making interest payments and principal to the bondholders throughout the life of the bonds

Trustee - Trustee acts as an intermediary between the fiscal agent and the issuer. The fiscal agent acts as an agent of the issuer for principal payments to a security holder. A fiscal agent is a bank appointed by the issuer of the bonds who performs various financial duties on behalf of the issuer which consists of buyback of the bonds, and handle tax issues related to the bond issuance process.

Auditors- Auditors need to be informed of the bond issue and make sure the signing and closing documents are arranged properly.

Rating agent- An agency (such as Fitch, Moody's, or Standard & Poor's) that assesses the financial position and creditworthiness of an issuer and assigns a rating to its bond issue.

Listing agent. -The listing agent advises the issuer on the procedure for listing and submits the documents for listing to the relevant stock exchange.

Transfer agent- A financial institution that maintains a record of the names of registered bond owners and any change in ownership when bonds are sold.

Once the syndicated bond is issued the bondholders can sell the bond to other investors in the capital market.