Credit Risk Evaluation of a Bridge Loan
Using the example of the acquisition of Syngenta by ChemChina in 2016/17, the case highlights the credit, legal and regulatory risks associated with a complex cross border acquisition finance transaction from a lenders point of view. The case focuses on the credit risk of a short-term bridge loan that is established to enable the borrowing group and its financial advisors to structure a long-term financing solution. Such transactions are typically structured using various special purpose vehicles (SPVs) in different jurisdictions. The complex structure of the transaction, crossing several jurisdictions and regulatory environments, requires the credit analysts to consider not only financial risks but also non-financial risks such as the questions of enforceability of the lender's claims.