Syndication is the sharing of a position or facility among several funders, with each taking a portion of the exposure and the return. It lets a large position be financed without any one party carrying all of it.
A lead arranger typically sources and underwrites the position and offers participations to others. Each participant relies on the lead's diligence to some degree, which makes the quality and transparency of that diligence important.
Syndicated positions need agreement on information rights, decision-making, servicing and the treatment of a position that deteriorates. The same measurement framework should be shared by all participants.
Syndication is not diversification of the underlying risk. It spreads the exposure across holders without changing the matter itself.
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