5. Loan Syndication Contracts - Part 1

This chapter contains the following sections:

5.1 Introduction

A contract is a specific agreement or transaction entered into between two or more entities. A customer who approaches your bank to avail of any of the services offered by your bank enters into a contract with your bank.

In the case of a syndication facility contract, the entities involved in a contract are the borrowing customers and the participants for any tranche of the agreement.

Similarly, any specific loans (drawdowns) disbursed by your bank under a tranche in the facility contract are also contracts.

5.2 A Borrower Facility Contract under Syndication Agreement

A facility contract is reached between a borrowing customer and a bank (or financial institution), which arranges or provides facility for the syndication. The arranger bank identifies one or more participants who pool funds to meet the borrowing requirements. The arranger bank disburses the loan, after receiving the contributions of the other participants. The participants share the interest and other income accruing from the loan, in the ratio of their participation that was agreed upon at the time of entering the tranche.

The syndication agreement with the borrowing customer is known as a borrower facility contract.

In a borrower facility contract, the borrowing customers receive loans from any of the arms or tranches. Each of the arms would have a set of participants, who would pool in their contributions toward the borrowing requirement in a mutually agreed ratio. The borrowing customer could receive loans towards the borrowing requirement as ‘drawdowns’ from a tranche. Therefore, a single tranche would have a specified number of drawdowns.

Each of the players in a tranche (that is, the borrowing customer and the participants) enters into a commitment contract. The individual loans (drawdowns) under each tranche are loan contracts.

Therefore, a borrower facility contract under a syndication agreement involves the following contracts:

  1. The main borrower facility contract between the borrowing customers and the facilitating bank. The contract officialises the agreement and makes the terms binding by law on all parties entering into it. (For the main borrower facility contract, contracts are drawn up for each of the participants to mirror the borrower facility contract)
  2. The commitment contracts at the level of a tranche opened under the main borrower facility contract, for each of the entities – the borrower and the participants.
  3. The actual loans disbursed to the borrowing customer as drawdowns under a tranche of the main borrower facility contract

The example given below illustrates the concept of syndication and the contracts involved. This example is referred throughout this chapter as a reference contract to illustrate the concept of the contracts.

Example

The main syndication facility contract

One of your customers, Mr. Robert Carr, has approached you for a loan of 100000 USD on 1st January 2000. You enter into a syndicated contract with him on the same date, with a view to meeting his funding requirement by identifying other banks or institutions that can share the load of funding. The agreement is booked on 1st January 2000, and the end date, by which all components of the borrowed amount are repaid, to be 1st January 2001.

The main borrower facility contract is the one under which all subsequent tranche / drawdown contracts will be processed. When you enter this contract (with Mr. Robert Carr) into the system, it saves the contract and generates a unique identifier for it, known as the Facility Contract Reference Number. (that is, the Contract Reference Number of the main borrower facility contract). Let us suppose the Facility Contract Reference Number assigned to this contract is 000SNEW000010001. Whenever you enter a tranche or drawdown contract against this main borrower facility contract, you have to specify this number as reference information.

Getting back to Mr. Robert Carr’s borrowing requirement, let us suppose that he wants to avail of the total loan principal in the following manner:

Tranche contracts

Mr. Robert Carr’s total syndicated loan principal is therefore required to be disbursed in two different sets of tranches, as seen above.

The tranche involves a ‘commitment’ from Mr. Robert Carr as the borrowing customer, as well as a commitment from your bank, as the arranger bank in the contract, to disburse the loan after pooling together resources from any willing participants. Each of the participants enters into a commitment contract, committing to provide the funds as agreed.

For the first tranche, wherein a principal of 50000 USD is to be disbursed, your bank has now identified Brinsley Bank and Dayton Commercial Bank as potential sources from whom funding may be obtained, to meet Mr. Carr’s borrowing requirement. The funding load is proposed to be shared in the following pattern, which is known as the ratio of participation:

When you open the tranche in the system, you input a borrower commitment for Mr. Robert Carr. When the BOOK event is triggered for the borrower commitment contract, the system creates commitment contracts for your bank and for Brinsley Bank and Dayton Commercial Bank, based on the borrower commitment contract.

Let us suppose that the first tranche is booked on 15th January. Let us suppose that the following Contract Reference Numbers are generated by the system for the contracts:

For the second tranche, wherein a principal of 50000 USD is to be disbursed, your bank has identified South American Overseas Bank and Banco Milan as funding partners. The ratio of participation is finalized as follows:

When you open the tranche in the system, you input a borrower commitment for Mr. Robert Carr. When the BOOK event is triggered for the borrower commitment contract, the system then creates commitment contracts for your bank and for South American Overseas Bank and Banco Milan based on the borrower commitment contract.

Let us suppose that the second tranche is booked on 15th April. Let us suppose that the following Contract Reference Numbers are generated by the system for the contracts:

Since the principal amount in each tranche is scheduled to be made available during a fixed period - between 1st January and 31st March for the first tranche, and between 1st April and 30th June for the second, the participants are reminded to fulfill their commitments just before each schedule is due. This would mean that the approved contributions from each participant would be credited into a common syndication pool before each schedule is due. The schedule dates, according to the agreement, are 30th January, 29th February and 31st March for the first tranche, and 30th April, 31st May and 30th June for the second.

Therefore, the relationship of the tranche contracts under a main facility contract can be seen below, using our example:

 

Drawdown Contracts

On any date including and following the 31st of January, Mr. Robert Carr can avail of his first drawdown loan of 20000 USD, under the first tranche. Similarly, on any date including and following the 30th of April, Mr. Robert Carr can avail of his first drawdown loan of 20000 USD, under the second tranche.

Accordingly, you have drawn up a drawdown schedule for disbursing the loans, where you have defined details such as the start date of the drawdown, the maturity date, currency, interest rate, and amount. These details are defaulted to the drawdown contract and you cannot change any of them when you enter a drawdown loan on the drawdown date. The drawdown loans are disbursed according to the drawdown schedule.

You can enter each of Mr. Carr’s drawdown loans into the system. The system saves the loan contract with a unique reference number. When the BOOK event for each of the loans is triggered, the system initiates deposit contracts for the participants of the tranche, based on the drawdown loan reference number.

Let us suppose that the following Contract Reference Numbers are generated for the loans and the contracts for the participants:

Tranche One, First Drawdown Loan (31st January)

Therefore, the relationship of the drawdown contracts under the first tranche can be seen below, using our example:

 

The relationship of the drawdown contracts in each drawdown would be similar to the structure depicted above, with the appropriate tranche reference numbers and the drawdown contract numbers.

Tranche One, Second Drawdown Loan (28th February)

Tranche One, Last Drawdown Loan (31st March)

Tranche Two, First Drawdown Loan (30th April)

Tranche Two, Second Drawdown Loan (31st May)

Tranche Two, Last Drawdown Loan (30th June)

5.3 Products for Loan Syndication Contracts

A product is a specific service, scheme or facility that you make available to customers.

For instance, the facility of a syndication agreement between your bank and other banks or financial institutions, for the purpose of pooling funds to disburse loans is a specific service you could offer. This service can be thought of as a product.

Similarly, the facility of availing loans through a drawdown, from any of the tranches under the borrower facility contract, is another specific service that you offer to customers. This could also be thought of as a product.

In Oracle FLEXCUBE, a contract is entered into the system against a product, and is specific to a customer. For instance, a drawdown loan for a borrowing customer under a tranche of a borrower facility contract is entered into the system against a borrower leg drawdown loan product.

Defining a product simplifies the process of entering a contract, since you can define certain attributes for a product that are applied to all contracts entered against the product automatically, saving your effort to specify them afresh each time you input a contract. When Oracle FLEXCUBE processes the contract, it applies all the attributes and specifications made for the product against which the contract was entered.

You can enter more than one contract against a product.

Before you enter any contracts for a facility contract, whether the main contracts or the commitments or loan contracts, you should have already defined the following products:

  1. A borrower facility product for borrower facility contracts. In addition, participant facility products for the resultant participant facility contracts.
  2. Tranche-level commitment type of products for borrowing customers, and participants
  3. Loan products for the borrowing customers for drawdowns under a tranche, as well as deposit products for the participants.

The definition of these products is explained in the chapter Defining Products for Loan Syndication in this user manual.

5.4 Processing a Borrower Facility

You can capture details for a borrower facility in the ‘Loan Syndication – Facility Contract Online’ screen. The screen is displayed with details of an existing facility.

You can invoke the ‘Loan Syndication – Facility Contract Online’ screen by typing ‘FCDTRONL' in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

To capture a new facility, click ‘New’ from the menu.

Entering the Facility Details

You can choose to enter the details of a facility either by:

Using a Template to enter a Facility

A template is a sample borrower facility, with details similar to that of many contracts under a category or involving a particular facility product. When a template is created, it can be re-used while entering other contracts and only those options specific to the contract need to be changed. Therefore, the process of specifying all the details for a contract is faster and easier.

To associate a template, you have to select the ‘Template’ from the option list. The details that have been stored for the template are displayed. A new reference number is automatically generated for the contract. After you have changed the values that need to be changed, click ‘Save’ to store the details in the system.

A description of the ‘Facility Contract Online’ Screen

In the ‘Loans Syndication - Facility Contract Online’ screen, you can capture the following details:

In addition, a vertical toolbar is also provided in the screen. These buttons are used to invoke other sub-systems meant to capture important information for processing a facility contract. These buttons have been described briefly below:

Buttons

Description

Currency

Click on this tab to invoke the ‘Currency Details’ screen. In this screen, you can maintain an allowable list of currencies for the contract.

Borrower

Click on this tab to specify the details pertaining to the borrowers of the facility contract.

Participant

This tab invokes the ‘Participant Ratio Details’ screen.

Fee

This tab displays the ‘Fee Components’ screen where you can view the default fee details for the contract.

Fee Schedules

You can view the ‘Fee Schedules’ screen. This displays the payment schedules for the various fee components.

Tax

You can view the ‘Participant Tax Details’ screen.

 

Settlements

You can view the ‘Settlement Message Details’ screen.

MIS

Click this tab to define MIS details for the contract.

UDF

Click this tab to capture values for the custom/user defined fields asso­ciated with the contract.

Party Type

Click this tab to invoke the ‘Party Details’ screen. In this screen you can specify the different types of entities or parties that would be applicable for the contract.

Diary

Click this tab to invoke the ‘Diary Contracts – Summary’ screen where you can view the event details for the contract.

Participation Summary

Click this tab to invoke the ‘Participant Facility Contract Summary’ screen. In this screen, you can view the underlying Tranche and Draw­down contracts for the Facility contract.

Events

Click this tab to invoke the ‘Event Log Details’ screen. Here, you can view the accounting entries for each event and the overrides encoun­tered, if any.

Note

Only the specifications exclusive to processing Loans Syndication contracts is explained in this chapter. For information on the generic functionality of the above sub-systems, refer the following Oracle FLEXCUBE User Manuals:

5.5 Capturing Facility Details

The following section explains the procedure for capturing the contract by associating it with a facility product. Based on the product code you choose, many of the fields are defaulted. You can overwrite some of these defaults to suit your requirements.

Product

You have to select the appropriate facility product from the option list provided. All authorized products maintained in the ‘Facility Product Definition’ screen is available in the option list provided. After you select a product, the following details will default to the contract:

When you click on the ‘Tab’ key on the keyboard, the system automatically generates the following reference numbers.

Contract Reference Number

The Contract Reference Number uniquely identifies the borrower facility contract in the system. It is generated by the system automatically for every borrower facility contract.

The system combines the following elements to form the Contract Reference Number:

Example

For instance, if you are entering the facility contract with Mr. Robert Carr, as in our previous example, the Contract Reference Number generated by the system was 000SNEW000010001.

The Julian date is expressed in the following format - YYDDD

Here, YY represents the last two numerals of the year, and DDD, the number of elapsed days in the year.

Example

For instance, 00059, in Julian format, would mean the 28th of February 2000. Here, 00 stands for the year 2000, and 059 would stand for number of elapsed days in the year 2000. The number of elapsed days in January would be 31, followed by 59-31 days in February, which computes to 28.

User Reference Number

The reference number is the identification that you specify for the borrower facility contract. You can specify any identification number. In addition to the Contract Reference Number that the system generates, this number is also used to retrieve information about the contract.

By default, the Contract Reference Number generated by the system is considered to be the User Reference Number for the contract.

You can use the User Reference Number to uniquely identify as well as classify the borrower facility contract for the internal purposes of the bank. For instance, you may want to identify all facility contracts entered into with all customers (borrowers) of a certain net worth; or all customers in a particular nationality, or a particular industry, and so on. In such a case, you can supply a unique prefix to the user reference number to identify and classify the contract.

Custom Ref No

You can capture a unique reference number for the facility. This number is used to identify the facility in the system. You can also query the facility based on this number. The reference number can consist of a maximum of 16 alphanumeric characters. You have to capture the custom reference number as mandatory information for the facility.

5.5.0.1 Specifying Contract Details

In the ‘Contract Details’ section of the screen, you have to specify the following:

Customer

You must specify the customer with whom the facility contract has been finalized. This, typically, is the borrowing customer.

The customers allowed to be counterparty to a facility contract are defined at the facility product level. The customers allowed for the contract are displayed in the option list provided. Select the customer from this list.

Note

A primary entity must be defined for every customer who is allowed to be a borrower of the facility contract, in the ‘Borrower Details’ screen.

Example

When you are entering a borrower facility contract that we saw in the first example, with Mr. Robert Carr, you can select the code assigned to Mr. Carr, in the system, from the option list.

You must also designate a Primary Entity to whom advices and notices related to the contract would be sent.

Currency

You have to specify the currency of the borrower facility contract. The currencies allowed for the facility product are available in the option list provided. Select the currency from this list. This is the currency in which the contract amount is expressed.

Amount

Specify the total principal that is to be lent to the borrowing customer through the borrower facility contract. The value you enter here is taken to be in the currency specified for the borrower facility contract. You can specify T or M to signify thousand or million, respectively. For instance, 10T would mean ten thousand and 5M, five million.

When you specify the contract amount, the system computes and displays the facility amount in reporting currency using the exchange rate maintained between the two currencies (Contract Ccy and Reporting Ccy) for the branch. This is displayed in the ‘Reporting Details’ section of the screen.

Facility Start Date

This is the date on which the contract becomes effective in the system. On any date following this, you can capture the tranche-level commitment contracts and the individual drawdown loans in the system. By default, the current date is displayed here.

However, you can change this date to any one of the following:

To change the date, click the ‘Calendar’ button. The system then displays the following message to seek confirmation for the change:

‘Facility Start Date and Tranche Start Date are defaulted to System Date, Continue?’

Click ‘OK’ in the message window to proceed with the change.

Note

Example

For instance, when you enter the borrower facility contract with Mr. Robert Carr, you must enter 1st January 2000 as the Value Date.

The application date on the day you enter the contract could be earlier, later or the same as this value date. For instance, Mr. Robert Carr could approach you on 15th January 2000 and enter into a contract with your bank, wanting that the contract to come into effect on 1st January. The value date in this case is 1st January 2000, and the contract would be backdated.

For backdated contracts, you can enter backdated tranches and drawdowns.

Alternatively, Mr. Robert Carr could approach you on 15th December 1999, and enter into a contract with your bank, wanting that the contract must come into effect on 1st January 2000. This is the value date, and the contract would be future dated.

For future dated contracts, you cannot enter tranches before the contract actually comes into effect (that is, before the value date).

Facility End Date

This is the date on or before which all tranches and drawdowns under the borrower facility contract mature.

You can enter any future date as the facility end date. It must be later than the ‘Start Date’ defined for the product involving the borrower facility contract, and earlier than the ‘End Date’ of the same product.

The ‘Facility End Date’ must be later than the ‘Facility Start Date’ defined for the contract.

Example

For instance, when you enter the borrower facility contract with Mr. Robert Carr, the customer indicates that the tenor of the contract must be a year, that is, the maturity date of the facility contract must be 1st January 2001. This means that all tranches and drawdowns entered must mature on or before that date.

Internal Agency ID

Select the CIF Id of a bank or its entity to play the role of a self participant in the syndicated loan. The id you select for the facility is propagated to the tranche and drawdowns created under it. During STP from LB module to OL module, the id selected here becomes the settlement party of the corresponding commitment/loan contract.

For details on STP, refer to the ‘Straight Through Processing (STP)’ chapter of this User Manual.

CUSIP Number

You have to capture a unique number to identify the tranche. This number is used to identify the loans being traded and to quote the market price. This number gets defaulted to all the drawdowns processed under the tranche and cannot be changed at the drawdown level. You can use a maximum of 16-alphanumeric characters for a CUSIP.

CUSIP also appears in all correspondences under the tranche that is,. advices to both participants and borrowers. CUSIP number is modifiable as part of contract amendment (CAMD).

After authorization of the CAMD event, the internal CUSIP propagates to all the underlying drawdowns, linked commitment, its underlying loans, linked trades and position contract, if any.

The Internal CUSIP cannot be changed as part of CAMD if there exists:

Note

The Internal CUSIP is mandatory and cannot be made null during contract input or amendment.

 

Specifying Details for Tranches

You need to specify the following details for tranches borrower facility contract:

Start Date

You have to capture the date on which the tranches created under the facility contract become effective in the system. By default, the current date is displayed here. However, you can change this date provided the new date is not earlier than the facility start date and later than the facility end date.

End Date

Similarly, you have to specify the date on which the tranche contracts processed under the facility contract should mature. You can enter any date as the facility end date provided:

Minimum Amount

You can specify the minimum amount that must be disbursed through the tranche contracts under the borrower facility contract. This amount is considered in the borrower facility contract currency.

When you enter a borrower tranche contract under the borrower facility contract, you have to specify the drawdown schedules. The system validates that the schedule amount is not be less than the minimum amount you specify here. If the tranche currency is different from the borrower facility contract currency, the amount is converted using the standard exchange rate, for the purpose of validation.

Maximum Amount

Similarly, you have to specify the maximum amount that must be disbursed through the tranche contracts under the borrower facility contract. This amount is also considered in the borrower facility contract currency.

When you enter a borrower tranche contract under the borrower facility contract, the system validates that the schedule amount does not exceed the maximum amount you specify here. If the tranche currency is different from the borrower facility contract currency, the amount is converted using the standard exchange rate, for the purpose of validation.

Specifying Other Details

You have to capture the following detail also for the facility contract:

Named Agent

Select an appropriate named agent from the adjoining option list. The list displays all valid named agents from ‘Named Agent Maintenance’ screen, who are mapped with the proof code that is the same as the department code under which the facility is being booked.

Note

Primary and Secondary administrators

You have to identify the officer assigned to be the primary and secondary administrator for the borrower facility contract. The administrators maintained through the ‘Administrator Details’ screen are available for selection. Upon selection of the code, the name of the administrator is displayed alongside.

For more details, refer the heading titled ‘Maintaining administrators’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

Agreement Title

A borrowing customer may avail a syndicated loan arrangement for a specific purpose, such as beginning a new venture, or a personal business project. You can capture this information as part of the facility contract.

You can also specify the agreement title in Chinese up to eighty five characters and the same is displayed in the ‘Loans Syndication : Draft - Tranche’ and ‘LS Tranche Contract Online’ screens.

Internal Remarks

You can specify information about the facility contract to be used for reference, within your bank. It is not printed on any correspondence with customers, but it is displayed when the details of the contract are displayed or printed.

You can also specify the internal remarks in Chinese up to eighty five characters and the same will be displayed in the ‘Loans Syndication : Draft - Tranche’ and ‘LS Tranche Contract Online’ screens.

Specifying Watch List Details

You can specify whether you want to keep the facility under watch. The following details related to the watch list can be specified here:

Watch List Facility

Select this check box to indicate that you would like to keep the facility under watch.

Watch List Remarks

Select the reason for including the facility under watch list from the option list available.

Note

This field is enabled only if you select the ‘Watch List’ check box.

The standard reasons for watch list are maintained in the ‘Static Maintenance -Detail’ screen.

The system displays the following override message when you try to perform any activity on existing tranches or drawdowns, or when you enter new tranches or drawdowns under a facility with Watch list. The override message displays the reason for the facility being under Watch List.

The underlying facility is under Watch List, reason being ‘Facility under Watch’

Do you want to continue?

For more details, refer the section titled ‘Maintaining Watch List Details’ in the ‘Reference Information for Loan Syndication’ chapter of this user manual.

Each of the vertical buttons in the screen is explained below in detail.

Indicating Agency Type

You can indicate the agency type of the transaction from the following options.

Note

You can indicate the agency type during the facility booking and you are not allowed to do any amendments to this at a later stage for this transaction.

 

5.5.0.2 Specifying Holiday Handling Preferences for Schedules

Schedule dates for a contract could fall on holidays defined for your branch or on holidays defined for the currency of the contract. The holiday handling preferences are defined as part of maintaining preferences for a facility product. These specifications default to any borrower facility contract using the product, and also to underlying borrower tranche or drawdown contracts that are opened under the facility contract.

You can make changes to the specifications defaulted from the borrower facility product.

Ignore Holidays

You have to check this option to instruct the system to ignore the holiday. Payment schedules are processed as per the due date even if the schedule falls due on a holiday.

Include Branch Holiday

If you select this option, the system considers the branch holidays also for handling schedule dates falling due on holidays.

Move Backward or Forward

You can indicate whether the schedule date falling on a holiday must be moved forward to the next working day, or backward to the previous working day.

Move Across Months

If you have indicated either ‘Forward’ or ‘Backward’ movement of a schedule date falling due on a holiday, and the moved schedule date crosses over into a different month, you can indicate whether such movement is allowable; it is allowable only if you select this option.

Cascade Schedules

If one schedule has been moved backward or forward in view of a holiday, cascading schedules would mean that the other schedules are accordingly shifted. If you do not want to cascade schedules, then only the schedule falling on a holiday is shifted, as specified. The other schedules remain unaltered.

Use Facility Currency

If you choose this option, the system checks whether the schedule date falls on a holiday defined for the currency of the facility (borrower) contract. This is applicable if the currency is different from the holiday currency you specify.

Use Local Currency

If you choose this option, the system check whether the schedule date falls on a holiday defined for the local currency, provided this currency is different from the holiday currency and facility currency you have indicated.

Holiday Ccy

By default, the system checks the holiday calendar maintained for the facility currency before arriving at the schedule due date. However, if required, you can include another currency for a similar check.

If you specify another currency, the system checks the holiday calendar for both the facility currency as well as the currency you select here.

The system checks the holiday table for the currencies you have specified. If it encounters a contract using any of the specified currencies, with a schedule date falling on a holiday for any of the currencies, the holiday is handled according to the holiday-handling preferences you specify.

Specifying Holiday Handling Preferences for Maturity Date

Just as you maintain holiday handling preferences for schedules of the facility contract, so also you should maintain the preferences for handling maturity dates falling due on holidays. The preferences available are similar to the ones available for the schedules.

Specifying Status Control

For a new contract, the default status is ‘NORM’ (Normal). It may be required that you change the default status of a contract. To change the status, select the appropriate status from option list provided. The statuses defined for the facility product through the ‘Status Maintenance’ screen will be available in this list.

For details on the ‘Status Maintenance’ screen, refer the heading ‘Maintaining statuses for a syndication product’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

5.5.0.3 Specifying Allowable Currencies under Currency tab

You can specify the different currencies that are allowable for the borrower facility contract, for tranches and drawdowns created under it. It is mandatory to include the facility currency in this list. To specify the allowable currencies, click ‘Currency’ tab in the ‘Facility Contract Online’ screen. The ‘Currency Details’ sub-screen is displayed, where you can specify the required currency list.

 

To maintain the allowable list of currencies, do the following:

  1. Select the currency from the option list provided. The description of the currency will be displayed when you select the currency.
  2. Click ‘Add’ button to insert a row and then select the next allowable currency. Continue this procedure until the required currencies are selected.
  3. To remove a currency from the allowable list, click the ‘Delete’ button.
  4. Click the ‘Save’ to save the list.

When you enter a tranche or a drawdown under the facility contract, the allowable currencies are those defined in this list.

Note

It is mandatory to maintain the allowable list of currencies for the facility before you invoke any of the other sub-screens. If not maintained, the system displays the following alert message when you attempt to invoke the other sub-screens:

Currencies are not entered.

Assignment Fee tab

The system displays the latest assignment fee amount for the facility/product in the tranche currency if it is maintained at the facility/deal level.

 

5.5.1 Specifying Borrowers for the Facility

You must specify the borrowers for the facility contract, who actually avail the drawdown loans under the facility contract. Click the ‘Borrower’ tab to invoke the ‘Borrower Details’ sub-screen.

 

By default, the customer of the facility contract is the borrowing customer. The following details of this customer are displayed in this screen:

Note

You can specify more than one borrower for a facility contract.

To add another borrower, do the following:

  1. Click ‘Add’ button to select a borrower. System displays a message to indicate that the SSI Mnemonic maintained for the counterparty and contract currency becomes applicable for the new borrowers as well. Click ‘OK’ in the message window to continue.
  2. Select the borrower from the option list provided. The ‘Borrower Name, SSI Counterparty, Counterparty Name and Entity Name’ are displayed when you select the borrower.
  3. Repeat steps 1 and 2 to add the required number of borrowers for the contract. To remove a borrower from the facility, click the ‘Delete’ button.

Note

You can specify the SSI and Netting Preferences at the tranche level.

The details to be captured for a borrower of the facility contract are discussed below:

Specifying Currency Mnemonic Details

The list of allowable currencies maintained through the ‘Currency details’ screen are displayed in the ‘Currency’ column for each borrower. Here, you are not allowed to add a currency to the list. However, you may specify an SSI (Standard Settlement Instructions) Mnemonic for each of the allowable currency. The SSI selected for the facility contract becomes applicable to the tranches and drawdowns processed under it.

SSI Mnemonic

SSI Mnemonics are maintained in the ‘Settlement Instructions’ screen for a Counterparty, Module, Currency, Product and Branch combination. The same is available for the counterparty/borrower of the facility contract. The option list provided display the following details:

The Mnemonics selected here obtains the settlement details for the borrower of the contract.

Note

If you do not associate a Mnemonic with the currencies, the system defaults the SSI Mne­monic for the counterparty and contract currency when you exit the ‘Borrower Details’ screen. The settlement instructions maintained for the counterparty becomes applicable for all the borrowers of the contract.

To return to the ‘Borrower Details’ section of the screen, you have to click ‘Up Arrow’ button.

Maintaining Entity Details for a Borrower

The entities maintained for the counterparty through the ‘Customer Entity Details’ screen defaults to the contract.

Primary Entity

From the list of entities, you can designate one of them as the ‘Primary’ entity. The primary entity will be the recipient of notices and messages for the borrower.

Note

A primary entity must be designated for every customer who is allowed to be a borrower of the facility contract. If not specified, you are not allowed to save the details.

To return to the ‘Borrower Details’ section of the screen, you have to click ‘Up arrow’ button.

5.5.1.1 Viewing of Settlement Amendment Screen

Oracle FLEXCUBE allows you to view the tranche details using the ‘SSI Mnemonic Detail’ screen. You can invoke the ‘SSI Mnemonic Detail’ screen by typing ‘LBDMENMC’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can view the details of the participant in this screen.

 

You can view the details of the borrower in the ‘Borrower SSI Mnemonic Detail Screen’. You can invoke the ‘Borrower SSI Mnemonic Detail’ screen by typing ‘LBDBRMNC’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can view the following details in the above screens:

Note

You can click the ’Unlock’ menu and edit the SSI Mnemonic details

In Oracle FLEXCUBE, you can amend the values of both borrower and participant sides made on Loan contracts through the ‘SSI Mnemonic Detail’ screen and then authorize the changes. On authorizing, the system displays the Change Log details along with the old values and new values.

Note

You can click on the ‘Unlock’ menu and edit the SSI Mnemonic details for a particular par­ticipant.

5.5.1.2 Viewing Standard Settlement Instructions for Borrowers

At the facility level, you can view the summary of the standard settlement instructions (SSI) maintained for the borrower and currency combination.

Select the borrower whose SSI details you want to view from Borrower Details screen and click ‘Settlement Instructions’ button.

You can invoke the ‘Settlement Instructions View’ screen by typing ‘LBDINSVW’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

The details are displayed in the ‘Settlement Instructions’ screen as shown below:

 

You have to click ‘Exit’ button to exit and return to the ‘Borrower Details’ screen.

5.5.2 Specifying Participants for the Facility

You must also identify the participants who contribute to the syndication agreement for the borrower facility contract. You can do this through the ‘Participant Ratio Details’ screen. To invoke this screen, click the ‘Participant’ tab in ‘Facility Contract Online’ screen.

 

The following details are displayed in this screen:

Each of the above procedures is discussed below:

5.5.2.1 Selecting Participants for the Facility

You can select the participants for the contract in the ‘Participant Ratio Details’ screen using Participant Details tab.

You can select participants from the ‘Participant’ option-list.

 

Note

GFCID is specified at the time of maintaining customer details in the ‘Customer Mainte­nance’ screen.

In the ‘Participant Ration Details’ screen, you can specify the proportion of income from the interest, charge and ad-hoc fee components (if applicable), which is due to each participant. This is expressed in percentage. System displays the component wise ‘Total’ in the last row.

Note

The component wise total ratio should be 100%. The system displays an error message if the total exceeds or is less than this value.

Additionally, you have to specify the following details for each participant:

5.5.2.2 Maintaining Preferences for the Participant

The following preferences can be defined for a participant:

Self Participant

Select this check box to indicate that the participant is a Self Participant. A self participant is one who is leading the loan contract.

Originator

Select this check box to indicate that the Self Participant is the originator. This is enabled only if the ‘Self Participant’ check box is selected.

You can mark only one self participant as the originator.

SSI Mnemonic

The SSI Mnemonics maintained in the ‘Settlement Instructions’ screen for the Counterparty, Module, Currency, Product, and Branch combination involved in the contract, is displayed in the option list provided. You can select the required value from this list. The value selected here obtains the settlement details for the participants of the contract.

If you do not specify the SSI Mnemonic for all the participants, system displays the following message:

SSI mnemonics for some/all participants have not been entered. It will be defaulted.

Note

You also have the option to select component wise SSI Mnemonic for each participant of the tranche.

For more details on selecting component wise SSIs, refer the heading ‘Changing the SSI for a component’ in this chapter.

Participant Type

Select the type of participant from the drop-down list. Following are the options available in the drop-down list:

Note

The participant type detail should be at the Tranche level.

Entity ID

For each participant, you have to associate an entity(s) to whom copies of the advices related to the contract will be sent. The entities maintained for the participants through the ‘Customer Entity Details’ screen defaults to the contract.

From the list of entities, you can designate one of them as the ‘Primary’ entity. The primary entity is the recipient of notices and messages for the participant.

Note

A primary entity must be designated for every customer who is allowed to be a participant of the facility contract. If not specified, you are not allowed to save the details.

Remarks

You can specify remarks for each entity associated with the participant here. A maximum of 105 characters is allowed.

To select the next participant, click ‘Add Row’ button.

5.5.3 Specifying Facility Fee Details

The fee components defined for the underlying facility product becomes applicable to the contract. To view the fee details, click ‘Fee’.

 

The following details of the components are displayed based on the product used:

Note

The Fee Basis defaults from the product level. However, the system allows you to amend the default value on saving the contract for the first time. Once the contract is authorized, you cannot make any further amendments to the fee basis.

You can modify the following details only:

Start Date

By default, the start date is equal to the ‘Facility Start Date’. This is the date on which the ad-hoc fee component becomes applicable for the facility. You can change the date only if the ‘Allow Start Date Input’ is selected for the component (in the ‘Borrower Product – FEE Details’ screen). If allowed to modify, the new date should be:

End Date

By default, the end date will be equal to the ‘Facility End Date’. This date marks the end of the component association period for the facility. You can change this date only if the ‘Allow End Date Input’ is selected for the component (in the ‘Borrower Product – FEE Details’ screen). If allowed to modify, the new date should be:

For more information on ‘Borrower Product – FEE Details’ screen, refer the heading ‘Specifying fee components for a borrower product’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

Liquidation Mode

You can opt to liquidate the components in one of the following ways:

Billing Notice Reqd

This value defaults from the product level and indicates whether you want to generate a billing notice for the associated component. You can amend this option, if required.

Note

If the ‘Billing Notice Required’ option is not checked for the product, you can not opt for the same at the contract level. Billing notice is not generated for such contracts.

Billing Notice Days

The billing notice days get defaulted from the product level. You can amend this value if required.

For more details on the manual mode of liquidation, refer the heading ‘Liquidating Fee Components’ in the ‘Processing Charges and Fees’ chapter of this User Manual.

5.5.3.1 Capturing Participant Fee Details

Click ‘P Fee’ in the Fee Components screen to define the fee amount for each participant. This button is enabled only if the fee class is Participant Driven. You can specify the participant fee in the ‘Participant Fee Amount’ screen.

 

In this screen, click the button to select the participants for whom you want to specify the fee amount. Once you select the participants, the names of the participant’s are displayed. You can specify the amount for each participant in the ‘Fee Amount’ field.

Based on the fee amount you specify here, the participant’s ratio is computed and displayed in the ‘Participant Ratio Details’ screen.

Note the following:

Note

After changing the details, click the ‘Ok’ to save and exit screen.

5.5.3.2 Computing FAS91 Fee Details

In the Fee Components screen, you can capture the FAS91 fee details.

 

On invoking ‘Fee Components’ screen, the following details are displayed:

Click ‘FAS91’ to specify information related to FAS91 in the ‘FAS91 Computation Details’ screen. This option is enabled only for components where the FAS91 check box is selected at the product level.

Click to select the participants for whom you want to calculate FAS91 details. A ‘Participant Selection’ screen will pop up with a list of all customers maintained in the system. On selecting the participants, system will display the same under the FAS91 Fee Details section in the ‘FAS91 Computation Details’ screen.

The other details required to be maintained in this screen are as follows:

Participant Type

Select the appropriate participant type from the drop down list. Values in the drop down are:

It is mandatory to specify a type for each participant. However, no validation would be performed on the basis of the participant type.

Facility Amount

Specify the facility amount for each participant. This amount will be used to calculate the weighted average yield for each participant.

Mgmt Component

Specify the management component of the fees. The value you specify here will be used to calculate the Weighted Average Yield. If you do not specify any value, system will default it to zero.

Yield Adj Component

Specify the yield adjustment component of the fees. The value you specify here will be used to calculate the Weighted Average Yield. If you do not specify any value, system will default it to zero. System will validate to ensure that the sum of Mgmt Component and Yield Adj Component does not exceed the facility amount.

Self Participant

Check this box to indicate that a participant is a self participant.

Once you specify the above details, click in the ‘FAS91 Computation Details’ screen. System will compute and display values for the following fields:

Total Bank Fees

This is the sum of the Mgmt Component and Yield Adj Component for all participants for which the ‘Self Participant’ check box was not selected.

Weighted Avg Yield of Part

System displays the weighted average yield of the participant. This is calculated as follows:

Sum (Yield Adjustment Component across all Participants which are not Leaders/Co Leaders and not Self Participant) / Sum (Facility amount across all Participants which are not Leaders/Co Leaders and not Self Participant)

Fees to be Amortized

System displays the fees to be amortized. This is calculated as follows:

Sum (Facility Amount for all self participants) * Weighted Average Yield

Fees to be Recognized

System displays the fees to be realized. This is calculated as follows:

Sum (Mgmt Component + Yield Adj Component of self participants) – (Fees to be amortized)

Pass FAS91 Accounting Entry

Select this check box to indicate that you can pass accounting entries for FAS91.

Note

You can liquidate FAS91 fees with other fee components.

Specifying the FAS91 Fee Sharing Details

You can specify the income sharing between the legal entities for each FAS91 fee using the ‘FAS91 Fee Sharing Details’ screen. Using this screen, you can also capture the branch or legal entity details and the expense code for FAS91 fees.

To invoke the ‘FAS91 Fee Sharing Details’ screen, click ‘Fee Sharing’ in the ‘FAS91 Computation Details’ screen.

 

Fee Component

System displays the fee for which the fee sharing ratio is calculated. If there are more than one FAS91 fees, system captures the fee sharing ratio for each component.

Branch/Legal Entity

Select the branch or legal entity from the list of options. System displays a list of all the branches maintained in the system in the option list.

Account No.

Select the GL account into which you want to post an entry. System displays a list of all GL leaves for the branch code are displayed in the option list.

Expense Code

Specify the Expense code with which you want to post an entry. System displays a list of all valid MIS codes in the option list.

Ratio

This is the ratio in which the ‘Fee to be Recognized’ is to be split. For example, if the ‘Fee to be Recognized’ is 100,000 out of which 40,000 is to be posted to the Branch, GL, Expense Code, you need to specify 40 in this field.

System validates to ensure that the total ratio is always 100.

Originator

If you have checked the ‘Self Participant’ and ‘Originator’ check boxes against a participant in the Participant Ratio Details screen, the name of the participant is defaulted here.

Expense Code

Select an Expense code of the originator self participant from the option list. System displays a list of all valid Expense Codes in the Branch of the Self Participant. This expense code is used while passing the accounting entries for the Fees to be amortized.

On clicking ‘Ok’ system performs the following validations:

5.5.4 Maintaining Facility Fee Schedules

You can specify schedules for fee components through the ‘Fee Schedules’ screen. To invoke this screen, click the ‘Fee Schedules’ button in the ‘Facility Contract Online’ screen.

 

Capture the following details in this screen:

Component

The fee components that have been associated with the product are available in the option list. Select a component from this list. Upon selection of the component, the ‘Schedule Start Date, Frequency and Unit’ are also displayed. You can change the default values.

Sch Start Date

This is the date on which the schedule for the fee component for the borrower facility begins. By default, this is equal to the fee ‘Association Date’. The first schedule would fall due on this date. You can change the date to any date that falls between the ‘Association Date’ and the ‘Facility End Date’.

No.

You must specify the number of schedules that would apply to the fee component of the borrower contract.

If you define a single schedule (that is, the number of schedules is one), Oracle FLEXCUBE initiates one schedule on the start date mentioned, not taking into account the frequency and the frequency unit.

Note

The Start Date for a single schedule is as follows:

If you define more than one schedule, Oracle FLEXCUBE initiates the first schedule on the start date mentioned, and subsequent schedules based on the frequency and the frequency unit specified.

Frequency

Select the periodicity at which the schedules must be initiated, with the first schedule on the start date mentioned. The options available are

Unit

You can specify the units in which the specified frequency are reckoned. For instance, consider a contract with the following details:

This means that the contract will have two schedules, initiated once in five months.

Amount

If the ‘Basis Amount Tag’ of the fee component is ‘User Input’ (as specified in the Borrower Product – Fee Details’ screen), you can capture the amount to be liquidated towards the fee component on the schedule date.

For all other ‘Basis Amount Tags’, the system computes the fee amount based on utilization.

For more details on defining fee components, refer the heading ‘Associating a Fee Class or Fee Rule with a product’ in the ‘Processing Charges and Fees’ chapter of this User Manual.

Note

5.5.4.1 Viewing the Payment Schedules

After capturing the schedules for the fee components, you can view the payment schedule details for the contract. To view the details, click the ‘Payment Schedules’ button.

The ‘Schedule Payment Details’ screen is displayed as shown below:

 

The following details are displayed in this screen:

For each component, it updates the following details:

In the ‘Payment Schedule Details’ screen you can view the schedule date changes and schedule history details.

5.5.5 Viewing Tax Details for the Facility

You can collect withholding tax from participants on fee components. If you have associated tax rules with the participant product linked with the underlying facility product, the same becomes applicable to the facility. You can view the tax details for the contract in the ‘Participant Tax Details’ screen. Click the ‘Tax’ to invoke the screen.

 

This screen displays the list of participants for the contract and the tax rules associated the contract, if any. This defaults from the facility product. If required, you may cancel the application of tax rule(s) for a participant. To do this, check the ‘Waive’ option against the selected tax rule.

The system passes the entries for tax based on the event you specify in the ‘Product Tax Linkage’ screen. Typically, tax on fee is calculated upon liquidation of the fee (event ‘FLIQ’ will be associated with the rule)

You can view the position identifier description in case the participant is Self Participant.

For details on associating tax with a product, refer the heading titled ‘Specifying tax details for a participant product’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

For more information on the Tax sub-system of Oracle FLEXCUBE, refer the Tax User Manual.

5.5.6 Specifying Settlement Instructions

You can view the settlement instructions for each borrower of the contract. You can use the ‘Settlement Message Details’ screen to do this. Click ‘Settlements’ in the ‘Facility Contract Online’ screen to access it.

 

The system obtains the settlement details based on the SSI Mnemonic for each borrower.

Note

When you are entering a contract in the ‘Facility Contract Online’ screen, and you click the ‘Settlements’ tab to invoke the ‘Settlement Message Details’ screen, the first line in Field 72 of the message generated will be replaced by the name of the customer (or bor­rower) involved in the contract. The second line will be replaced by the ‘User Reference Number’ of the tranche contract. Once the SWIFT message is generated, the customer name and the user reference number will be displayed in the section titled ’72: Sender to Receiver Information’ in the second ‘Msg Details’ tab. This is shown below:

If the ‘Chinese Characters in Payment’ box is checked in the ‘Loan syndication- Branch Parameters’ screen, then only you can enter the Chinese characters in the field 57, 59, and 70 for foreign currency and local currency settlement instructions / accounts and there will not be any validations in the system. You need to operationally control it.

You are allowed to enter the information in Chinese or English or a combination of both in this field. If it is a combination, then the system will consider it as Chinese and allow up to 35 characters.

Note

This is applicable only for ASPAC region.

For more details about the ‘Settlement Message Details’ screen, refer the Settlements User Manual.

Click the ‘Exit’ button to exit the screen.

5.5.7 Viewing the MIS Details

You can view the MIS (Management Information System) details in the ‘MIS Details’ screen. To invoke this screen, click the ‘MIS’ in the ‘Facility Contract Online’ screen.

 

For details on the ‘Transaction MIS Details’ screen, refer the MIS User Manual.

5.5.7.1 Validating Expense and Proof Codes

While booking a new facility, upon selection of named agent, the system defaults expense code and proof code in Transaction MIS maintenance sub-screen in facility contract online screen.

While booking a new tranche, Expense code and proof code from facility contract are defaulted in MIS sub-screen in tranche online screen.

Similarly, while booking a new Drawdown, Expense code and proof code from tranche contract are defaulted in MIS sub-screen in Drawdown online screen

System allows you to change the values of the expense code and proof code in the MIS screen, while booking a facility, tranche, or a drawdown. However, if the validation fails, system displays appropriate error messages if the following validations are not met:

Note

You cannot amend the proof code and expense code in the respective MIS screens after the tranche/drawdown is authorized.

5.5.8 Specifying Parties for the Facility

You can also specify the different types of parties that would be applicable for the borrower facility contract, as well as the applicable parties belonging to the selected type, in the ‘Party Details’ screen.

Too invoke the ‘Party Details’ screen, click ‘Party type’ button in the ‘Facility Contract Online’ screen.

 

Capture the following in this screen:

Party Type

The party types associated with the borrower facility product is applicable for the contract. The option list displays the same. Select a type from this list.

Party ID

For the chosen party type, you have t select a party from the option list. This list displays all the customers maintained in the system. Upon selection of the ID, the ‘Party Name’ is displayed alongside.

Note

For more details on this, refer the heading ‘Associating appropriate party types for borrower facility products’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

5.5.9 Saving the Facility

After capturing the required details, you have to save the contract and have it authorized by your supervisor.

For more details on ‘Save’ and ‘Authorization’, refer the Common Procedures User Manual.

After the facility is saved and authorized, the following details will be displayed in the audit trail section at the bottom of the screen:

After you save the contract, you can view the following details of the contract:

These details are discussed below.

5.5.10 Viewing Facility Diary Events

You can view the diary events defined for the contract in the ‘Diary Contracts – Summary’ screen. To invoke this screen, click ‘Diary’.

 

Diary events are user defined events which are maintained at a module level through the ‘Diary Event Maintenance’ screen. You can associate the required diary events with a product in the ‘Diary Event Association’ screen.

The system allows you to perform a case-independent query (upper, lower, or mixed case) using the following fields:

Note

You can perform a case independent search only if the parameter, ‘CASE_SENSITIVITY’ in cstb_param, is set to ‘Y’

For more details on this screen, refer the heading ‘Maintaining diary events’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

For a borrower facility, tranche or drawdown contract, you can specify diary events that needs to be processed through the ‘Contract Diary Events’ screen.

Refer the heading ‘Specifying diary events for a borrower syndication contract’ in this chapter for details on the ‘Contract Diary Events’ screen.

5.5.11 Viewing Participant Summary Details

The ‘Participant Facility Contract Summary’ screen will give you a summary of the participant facility contracts created under a facility contract. To view the details, click the ‘Part Sum’.

 

In this screen, the following details are displayed:

5.5.11.1 Viewing Participant Tranches under a Participant Facility Contract

From the ‘Participant Facility Contract Summary’ screen, you can also view the participant tranches created under a participant facility contract.

5.5.11.2 Viewing Participant Facility Contract Details

To view a participant facility contract go to ‘Loans Syndication – Participant Contract Input (LPDCOMNT)’ screen. .

 

For more details on this screen, refer the heading ‘Viewing Participant Contracts’ in this chapter.

5.5.12 Viewing Events for the Facility

You can view the events triggered during the contract life cycle in the ‘Event Log Details’ screen. To invoke this screen, click the ‘Events’ in the ‘Facility Contract Online’ screen. The events defined for the facility product are triggered for the contract.

 

The following details are displayed in this screen:

5.5.12.1 Viewing Event-wise Accounting Entries

To view the event wise accounting entries, select the event and click ‘Accounting Entires’ .

 

This screen displays the details of accounting entries passed for the selected event and the overrides encountered during the event, if any.

Click ‘Cancel’ button to exit the screen. You return to the ‘Event Log Details’ screen.

5.5.12.2 Viewing Outgoing and Incoming Messages for the Event

You also have the option to view the messages/advices received (IN) or fired (OUT) during the event.

  1. To view messages, select an event and click 'Messages'.

The Advice Message screen appears. It displays all the messages which are generated against that event.

  1. Select a message and click 'Message Details'

The name, location, address of the customer and the media used for sending the message get displayed in this screen along with the message details.

For FpML messages, the value of ‘Media’ gets displayed as ‘FPML’.After you save and authorize the facility contract, you can process tranches under the facility.

5.5.13 Authorizing Facility Contracts

You can authorize the tranche contract using the ‘Authorization’ screen. You can invoke this screen by selecting Authorize from the menu.

 

5.6 Viewing Facility Details

You can view the Facility details summary on the ‘Loans Syndication - Facility Contract Summary’ screen. You can invoke the ‘Loans Syndication - Facility Contract Summary’ screen by typing ‘FCSTRONL’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

The system allows you to perform a case-independent query (upper, lower, or mixed case) using the following fields:

Note

You can perform a case independent search only if the parameter, ‘CASE_SENSITIVITY’ in cstb_param, is set to ‘Y’.

5.7 Processing Loan Syndication Contracts

After you enter a borrower facility contract into Oracle FLEXCUBE, you need to:

  1. Open a tranche for the borrower
  2. Create a drawdown for the borrower when a drawdown is requested, and as soon as intimation is received from the participants, indicating that their commitment has been fulfilled and the funds have been credited to the nostro account of the arranger (your bank).

A drawdown loan can be entered for the borrowing customer on each of the schedule dates that are specified according to the borrower’s requirement. The arranger bank typically checks to ensure that all the necessary formalities have been completed, and any necessary documents required to be furnished by the borrower have been received, before entering a drawdown loan.

The participants make their contributions available in their vostro accounts, from where the funds are drawn into the common syndication pool, and then to the account of the borrower, when a drawdown loan is entered.

The system therefore processes the borrower facility contract in two stages:

  1. Processing the tranches
  2. Processing the drawdowns

The system also processes two different types of contracts when it processes a borrower facility contract:

  1. Those related to the borrower. These include the main syndication agreement facility contract, the borrower commitment that you enter when you open a tranche, and any borrower drawdown loan that you enter under a tranche. These contracts constitute the borrower leg of the borrower facility contract.
  2. Messages to the borrower are generated and transmitted through the borrower leg.
  3. Those related to the participants. These include the participant facility contracts, tranche commitments or drawdown deposit contracts that are initiated by the system when the BOOK event for the corresponding borrower contract is triggered. These contracts constitute the participant leg of the facility contract.

5.7.1 Tranche-level Contracts

After a borrower facility contract has been initiated, a number of arms or tranches can be opened under it, as specified under the contract. The processing of each tranche involves the creation of a simple commitment contract for the borrowing customer against the Reference Number of the borrower facility contract. This contract constitutes the borrower leg of the processing of the tranche.

When you create the borrower commitment (tranche) contract, you must also specify the following details:

You must also specify schedules for drawdowns under the tranche. The system generates a Reference Number for the borrower commitment contract.

After you have entered a borrower tranche contract, when the BOOK event of the contract is triggered, the system automatically initiates commitment contract for the participants. These contracts constitute the participant leg of the processing of the tranche. The system also generates SWIFT messages to each participant according to the drawdown schedule, intimating them to fulfill their commitment and disburse the funds to the nostro account of the arranger bank.

When a tranche is created, a commitment contract is created.

5.7.2 Drawdown Contracts

After the tranche level commitment contracts and the drawdown schedules have been entered, the arranger bank typically disburses the loans to the borrowing customer, against the Reference Number of the borrower tranche contract as well as the Reference Number of the main facility contract; and according to the drawdown schedule defined for the tranche. The borrower loan contract constitutes the borrower leg of the processing for drawdowns.

To disburse the drawdown loan, you must enter the borrower loan contract and specify the following details for the participants:

The system generates a Reference Number for the borrower loan contract.

After you have entered a borrower drawdown contract, when the BOOK event of the contract is triggered, the system automatically initiates deposit contracts for the participants. These contracts constitute the participant leg of the processing of the drawdown. They are linked to the respective commitment contracts created at the tranche level.

5.7.3 Initiation of Participant Contracts

To recall, you open a tranche by entering a commitment contract for the borrower. When the BOOK event for the borrower tranche contract is triggered, the system creates commitment contracts for the participants, using the product specified for participant tranche contracts, in the product preferences for the borrower tranche product which the borrower tranche contract uses, and the participant details maintained for the borrower tranche contract.

Similarly, after you enter a drawdown loan contract for the borrower under a tranche reference number, the system creates a deposit contracts for participants, using the product specified for participant drawdown contracts, in the product preferences for the borrower drawdown product which the borrower drawdown contract uses, and the participant details maintained for the borrower tranche contract.

Participant contracts initiated by the system can be viewed and amended using the Participant Contract screen, which is discussed later in this chapter.

5.8 Processing a Borrower Tranche Contract

You can process a tranche contract in the ‘LS Tranche Contract Online’ (LBDTRONL) screen.

Similar to capturing a facility contract, you can capture a tranche contract either by:

The CUSIP and SSI Counterparty (Settlement Party) are unique across tranche contracts under the same CUSIP. The system validates the SSI Counterparty and CUSIP while saving the tranche contract and displays the following error message In case of duplicate tranche booking.

Tranche with the same SSI Counterparty and CUSIP Number already exists.

For more details, refer the heading ‘Entering the facility details’ in this chapter.

Note that you can add a CUSIP to an existing tranche. Similarly, you can associate an existing CUSIP with a new tranche.

5.8.1 Capturing Details in the ‘LS Tranche Contract Online’ Screen

In the ‘LS Tranche Contract Online’ screen, you can capture the following details:

In addition, a vertical toolbar provided in the screen, may be used to invoke other sub-systems meant to capture important information for the tranche contract. These buttons have been described briefly below:

Tabs

Description

Currency

Click this tab to invoke the ‘Currency Details’ screen. In this screen, you can maintain the holiday currencies for various events and exchange rate fixing and interest rate fixing details.

 

Borrower

Click this tab to specify the details pertaining to the borrowers of the tranche contract.

 

Participant

This tab invokes the ‘Participant Ratio Details’ screen.

Linkages

Click this tab to display ‘Participant Commitment Linkage’ section . You can link the commitment contract to each self participant using this screen.

LC Issuer

Click tab to invoke the ‘LC Issuer Mapping Details’ screen. In this screen, you can identify the participants who could be issuers of LCs.

DD Product

This tab displays the ‘DrawDown Products’ screen.

Skim Details

Click this tab to maintain the Skim details for participants of the tranche.

Charge

Click this tab to view and modify the charge details for the tranche.

Margin

Click this tab to maintain the margin Slab/Tier structure.

Fee Rule

Click this tab to associate fee rules with the contract.

Fee

This tab displays the ‘Fee Components’ screen where you can view the default fee details for the contract.

Tax

Click on this button to view the ‘Participant Tax Details’ screen.

Overwrite Default SI

Click this button to view the ‘Overwrite Settlement Instruction Details’ screen.

Settlement

Click this button to view the ‘Settlement Message Details’ screen.

Tranche Repay­ment Schedules

Click this tab to define repayment schedules for tranche

MIS

Click this tab to define MIS details for the contract.

Party Type

Click here to invoke the ‘Party Details’ screen. In this screen you can specify the different types of entities or parties that would be applicable for the con­tract.

UDF

Click this tab to capture values for the custom/user defined fields associated with the contract.

Diary

This tab to invoke the ‘Diary Contracts – Summary’ screen where you can view the event details for the contract.

Advice

Click this tab to view the advices for the contract.

‘Netting

Click this tab to view the netting cash flow summary details.

 

Msg. Prev

Click ‘Events’ tab >’Messages’ tab> Message Preview. This is used to pre­view events/associated messages.

‘Participant Summary’

Click this tab to invoke the ‘Participant Facility Contract Summary’ screen. In this screen, you can view the underlying Tranche and Drawdown contracts for the Facility contract.

Events

Click this tab to invoke the ‘Event Log Details’ screen. Here, you can view the accounting entries for each event and the overrides encountered, if any.

Assignment’

Click this tab to invoke ‘Assignment Validations’ screen.

Floor and Ceil­ing

Click this tab to invoke ‘Floor and Ceiling’ screen.

Collaterals

Click this tab to invoke the ‘Collateral’ screen.

Collateral Account’

Click this tab to invoke the ‘ Collateral Account ’ screen.

Collateral Entity

Click this tab to invoke the ‘Tranche Collateral Entity Maintenance’ screen.

Collateral Partic­ipant

Click this tab to invoke the ‘Participant Collateral Detail’ screen.

Escrow

Click this tab to link escrow accounts to a contract.

Agent CIF

Click this tab to invoke ‘Origination Agent CIF/Mnemonic Maintenance’ screen.

ELCM Block Details

Click this tab to invoke ‘Contract Block Details’ screen.

5.8.2 Capturing Tranche Details

To capture a new tranche contract, select ‘New’ from the menu.. In ‘LB Tranche Contract Online’ screen, enter Syndication Reference and Product code. The following information defaults to the ‘Contract’ tab of the screen:

In the header section of the screen, you have to specify the following:

User Reference Number

The reference number is the identification that you specify for the borrower tranche. You can specify any identification number. In addition to the ‘Contract Reference Number’ that the system generates, this number is also used to retrieve information about the tranche.

By default, the ‘Contract Reference Number’ is considered to be the User Reference Number for the tranche.

Custom Ref No

You can capture a unique reference number for the tranche contract. This number is used to identify the tranche in the system. You can also query the tranche based on this number. The reference number can consist of a maximum of 16 alphanumeric characters. You have to capture the custom reference number as mandatory information for the tranche.

Facility Name

You can provide a name to the tranche being processed. The facility name is available for querying the contract. This name is also displayed for all the drawdowns processed under the tranche. At the drawdown level, you cannot change the facility name.

The name can consist of a maximum of 35 alphanumeric characters and you are allowed to amend the name anytime during the tranche life cycle. This results in change of the facility name in all the linked drawdown contracts.

Note

It is not mandatory to specify a facility name for a tranche.

When the facility name is changed at the tranche level, it is propagated to all the underlying trades. When such a tranche amendment is authorized, system searches all the underlying trades having the same CUSIP/ ISIN and updates the latest facility name for all the fetched records.

As part of tranche amendment authorization, system gives an override before propagating the new facility name to all the versions of the open trades. If you select ‘No’ to the propagation, then, you should manually amend trades with the latest facility name.

The facility name is updated both at the draft and trade level.

5.8.3 Capturing Details in the ‘Contract’ tab

You can overwrite some of the default values at the tranche level.

 

 

5.8.3.1 Specifying Basic Details

You need to specify the following as part of the basic contract details:

Customer

By default the customer (borrower) of the facility contract is displayed as the customer for the tranche contract. You can select a different customer from the option list provided. This list displays the borrowers identified for the facility contract. The customer you select defaults to any borrower drawdowns you enter against the tranche.

Upon selection of the customer (borrower), the settlement details maintained for customer is defaulted in the ‘Settlement Details’ section of the screen. This enables the system to easily obtain the settlement details defined for the selected customer.

CUSIP Number

You have to capture a unique number to identify the tranche. This number is used to identify the loans being traded and to quote the market price. This number gets defaulted to all the drawdowns processed under the tranche and cannot be changed at the drawdown level. You can use a maximum of 16-alphanumeric characters for a CUSIP.

CUSIP also appears in all correspondences under the tranche that is,. advices to both participants and borrowers. CUSIP number is modifiable as part of contract amendment (CAMD).

After authorization of the CAMD event, the internal CUSIP propagates to all the underlying drawdowns, linked commitment, its underlying loans, linked trades and position contract, if any.

The Internal CUSIP cannot be changed as part of CAMD if there exists:

Note

The Internal CUSIP is mandatory and cannot be made null during contract input or amendment.

Currency

The currency of the facility contract is displayed for the tranche as well. This is the currency in which the tranche amount is expressed. You can change the currency, if required. The option list displays the allowable currencies defined for the facility contract against which the tranche is processed.

Amount

You have to specify the total amount that should be committed under the tranche (for borrower tranche contracts). The amount you enter must be:

If the amount is below this minimum, the following error message is displayed:

Amount must be more than the minimum defined at the facility contract level

Amount must be less than the maximum defined at the facility level

The value you enter here is taken to be in the currency specified for the facility contract. You can specify T or M to signify thousand or million, respectively. For instance, 10T would mean ten thousand and 5M, five million.

Note

Ext CUSIP/ISIN

The external CUSIP/ISIN number is captured here. It is modifiable as part of contract amendment (CAMD).The external CUSIP number is not used for internal processing, but it is used in non-processing areas such as faxes, payment messages, reports and interfaces.

The FpML messages for the participants at tranche and drawdown level are generated only if you have specified the External CUSIP/ISIN number. Otherwise, it is systematically suppressed.

After authorization of the contact amendment, which triggers the CUAD (CUSIP Amendment) event, the external CUSIP/ISIN is propagated to all the underlying drawdowns, linked commitment, its underlying loans, linked trades if any.

External CUSIP/ISIN gets defaulted to all the drawdowns processed under the tranche and cannot be changed at the drawdown level.

Whenever there is a change in the External CUSIP/ISIN, the system sends the following FpML messages to Markit (a financial system that acts as an inventory for all agency activities)

Refer the chapter ‘FpML Messaging’ for more details on the update process

Ext Deal CUSIP/ISIN

Specify the external deal CUSIP/ISIN.

It is not mandatory to specify the Ext Deal CUSIP/ISIN. System does not perform any validation for the uniqueness of the Ext Deal CUSIP/ISIN. Multiple tranches can have same Ext Deal CUSIP/ISIN. However, system validates that the maximum permissible length for the value you specify for ‘Ext Deal CUSIP/ISIN’ does not exceed 16 characters.

Ext Deal CUSIP/ISIN is captured during Tranche booking. However it can be amended during Tranche amendment, from the 'Tranche Contract Online' screen. During Tranche booking, the value for ‘Ext Deal CUSIP/ISIN’ is defaulted from the ‘CUSIP No’ of the Facility (Deal). The defaulted value can be changed, if required. However, any amendment of ‘CUSIP No’ at Facility (Deal) level will not propagate to the ‘Ext Deal CUSIP/ISIN’ value at Tranche level.

Note

The following reports display the value captured for ‘Ext Deal CUSIP/ISIN’ for the tranche:

 

5.8.3.2 Specifying Tranche Details

Tranche specific details will include the following:

Booking Date

This is the date on which the contract is captured in the system. The current system date (today’s date) will be displayed here. You cannot change this date. This date is only for information purposes and the actual accounting entries are passed only as of the ‘Value Date’ of the contract.

Value Date

This is the date on which the contract comes into effect in the system. The tenor of the contract begins on this date, and accounting entries with respect to the contract are passed as of this date. You can specify any date as the Value Date. However, it must be:

Note

The system displays an override if the specified Value Date falls on a holiday of the local currency.

You can amend the value date as part of Contract Amendment:

The amended value date gets defaulted to effective date in ‘Fee Rule’ screen and ‘Margin Maintenance’ screen with an override message asking for your confirmation. Select yes to continue or no to change the effective date manually. In addition, you can redefine the fee and repayment schedules manually.

If the new value date is less than or equal to application date then contract initiation (INIT) happens as part of save of amendment.

Value Dated Balances are repopulated when there is amendment of value date. You can define multiple adhoc fee components based on the requirement. In addition, pro rata type of participant FFT to facilitate the display of the adhoc FEE and its amount. Margin rate field and values are provided in future dated Borrower rate setting fax.

Example

For instance, when you open a tranche under the main borrower facility contract 000SNEW000010001 with Mr. Robert Carr, you can enter 15th January 2000 as the Value Date for the borrower tranche. If you do so, on any date including and following 15th January, a drawdown can be entered for Mr. Robert Carr, if requested by him.

The application date on the day you enter the contract (which is the booking date) could be earlier, later or the same as this value date. For backdated contracts, you can enter backdated borrower tranches. For future dated contracts, you cannot enter tranches before the contract actually comes into effect (that is, before the value date).

Similarly, when you enter the first drawdown under the first tranche, you would enter 31st January 2000 as the Value Date for the drawdown, according to the drawdown schedule requested by Mr. Carr. Again, the application date on the day you enter the contract (which is the booking date) could be earlier, later or the same as this value date.

Original Start Date

This displays the date on which the contract was originally initiated. If the contract has been rolled over more than once, this is the date on which the first loan was initiated. By default the current system date is displayed.

If you are entering a contract that has already been initiated, enter the date on which the same began. In this case, the date is for information purposes only and for all accounting purposes the Value Date is considered as the date on which the contract was initiated. The original start date cannot be greater than the value date of the contract.

Maturity Date

If the tranche product has a standard tenor, the maturity date is default based on the tenor maintained and the start date of the contract. You can change this default date, if necessary. However, the maturity date of the tranche should be between the facility start date and the end date.

If the maturity date is known at the time of capturing the tranche (fixed maturity), you can specify it for the contract.

DD Expiry Date

You must specify the date beyond which further drawdowns under the tranche contract will not be allowed. The system does not calculate any commitment fee beyond this date.

By default, the expiry date of the drawdowns processed under the tranche will be equal to the tranche maturity date. You can change it to any date between the (Value Date + 1) and the Maturity Date of the tranche contract.

Limit Line

You can associate a limit line to track the loan availed by the customer, if required. The credit lines defined for the selected tranche customer is available in the option list. The exposure is tracked against the line selected here.

5.8.3.3 Specifying Drawdown details

The details specific to the drawdowns processed under the tranche include the following:

Minimum DD Amount and Maximum DD Amount

Specify the minimum and maximum amounts that can be disbursed through borrower drawdowns under the borrower tranche contract. This amount is considered in the borrower facility contract currency.

When you capture the drawdown amounts, the system ensures that the amount is within the range of minimum amount or maximum amount specified here.

Note

Maximum No of DDs

You have to capture the maximum number of borrower drawdowns under the tranche being processed. When you enter a borrower tranche contract under the borrower facility contract, you specify the drawdown schedules. The system validates that the total number of outstanding drawdowns (also taking into account future drawdown schedules) does not exceed the maximum number of drawdowns specified here. Similarly, when a disbursement is made on initiation of a drawdown, the system validates that the total number of outstanding drawdowns including the drawdown being initiated does not exceed the maximum number of drawdowns specified.

Note

Clearing Line

Specify the clearing line that should be linked to the tranche. The adjoining option list displays all available clearing lines based on the GFCID/customer of the tranche contract, if the box ‘NAM Limit Confirmation’ is selected in the ‘Loan Parameters’ screen. If the box ‘NAM Limit Confirmation’ is not selected in the ‘Loan Parameters’ screen, this list displays all available clearing lines based on the GFCID/Customers maintained in the ‘Tranche Borrower Details’ screen. You can also select the appropriate one from it.

You can update this value at the time of contract booking and amendment. On copying an existing contract, this value is not copied.

The system displays an override message for Tranche and Drawdown in the following cases:

Note

 

5.8.3.4 Selecting Liquidation Details

In the ‘Liquidation’ section of the screen, specify the following:

Liquidation Mode

The mode of liquidation of components default from the tranche product associated with the contract.

At the tranche level, you can change the mode to any one of the following methods:

For more details on this screen, refer the heading ‘Forward processing of events’ in this chapter.

For more details on ‘Contract Payment’ screen, refer the heading ‘Processing Repayments Manually’ in the ‘Processing Repayments’ chapter of this User Manual.

For more details on ‘Fee Liquidation’ screen, refer the heading ‘Liquidating Fee Components’ in the ‘Processing Charges and Fees’ chapter of this User Manual.

Billing Notice Days

You can instruct the system to generate the Billing Notice for participants/ borrowers pre-defined days before the due date of the components. For instance, if the component due date is 31st Dec ’05 and the billing notice days is 2, the system sends a notice to the customer on 29th Dec ’05 as a reminder of the payment due on 31st. This applies to ad-hoc fee, interest and principal schedules, defined for the contract.

5.8.3.5 Specifying Global Tranche Amount

Global Tranche Amount

You can specify the Global Tranche Amount for Participation type of contracts. You can specify the Global Tranche Amount in the ‘Tranche Online’ screen during new non-lead tranche booking only. You cannot amend the Global Tranche Amount during Tranche amendments. The Global Tranche Amount currency is always same as the Tranche currency.

Note

If tranche amount resulted after tranche value dated amendment is less than the global LC sublimit level, then the system throws an error.

However, Tranche Global Amount can be amended using the Global Amount Update/Amendment screen. The GAMD event fires on the Tranche contract while amending the global amount using the Global Amount Update/Amendment screen.

 

5.8.4 Capturing Details in the ‘Preference’ tab

5.8.4.1 Named Agent Details

System displays the following details in this section:

These values are defaulted from facility contract online screen when you book a new tranche.

5.8.4.2 Specifying Other Details

The following details may also be specified for a tranche:

Verify Funds

Before debiting the customer’s repayment account for liquidation (repayment), you can instruct the system to check for the availability of the required funds in the account. Select this option to initiate the same before automatic liquidation is done.

Suppress B. V. Payment Message

You can suppress the generation of back value payment messages for the tranche contract, if required. You have to check this option to facilitate it.

Net Across DD

If on the maturity date of a drawdown, a borrower books another drawdown, you have the option of netting the payment. The netting of payment can be done for the principal, interest and fee components of the loan. To avail this option across drawdowns for cash flows within a tranche, you have to check this option. If selected, netting is allowed for the cash flows both at the borrower and participant side. Further, you can also specify the netting preferences in the ‘Participant Ratio Details’ screen and the ‘Borrower Details’ screen.

The accounting entries during netting are posted to the Netting Suspense GL that you have selected in the ‘Syndication Loans and Commitments – Branch Parameters’ screen.

Example

Given below is an example of a netting transaction:

Consider a term loan under a revolving tranche, for which netting is required to be done. The table given below lists the cash flow on the date of the roll-over:

Drawdown Ref. No.

Component

Currency

Amount

Cash Flow Indicator

D1

Principal

GBP

10 million

In

D1

Interest

GBP

2 million

In

D1

Fee

GBP

3 million

In

D2

Principal

GBP

10 million

Out

The net debit amount to the borrower is 5 million.

The following are the accounting entries:

Dr.

Customer

GBP 5 million

Cr.

Netting Bridge Account

GBP 5 million

Dr.

Netting Bridge Account

GBP 5 million

Cr.

Loan D1 (Principal)

GBP 5 million

Dr.

Loan D2 (Principal)

GBP 10 million

Cr.

Loan D1 (Interest)

GBP 2 million

Cr.

Loan D1 (Fee)

GBP 3 million

 

For more information on ‘Participant Ratio Details’ screen, refer the heading ‘Specifying participant details for the tranche’ in this chapter.

Cascade Participation

This specification defaults from the tranche product. You can change your specification at the tranche level. You can check this option to indicate whether any changes to participants of a tranche contract must be propagated to all related drawdown schedules and active drawdowns.

However, if you check the ‘Cascade Participation’ option for a tranche, the system automatically converts the tranche to a ‘Non Cascade Participation’ type if you process any one of the following drawdown activity:

The system triggers the ‘CASC’ event to indicate the change in the ‘Cascade Participation’ attribute of the tranche. After the CASC event, the system automatically deselects the ‘Cascade Participation’ option for the tranche.

All restrictions applicable for Non-Cascade type of tranche is applicable for the converted tranche from the value date of the tranche. However, if a Participant Ratio Amendment (PRAM) has occurred for the tranche before the conversion, the restrictions are applicable from the Participant Ratio Amendment date.

Note

Sighting Funds Applicable

Select this field to indicate that sighting funds is applicable for the tranche.

Note

Assignment Validations Applicable

Select this check box if assignment validations are applicable for a tranche.

Note

This field is enabled only if you have selected the ‘Transfer Type’ option as ‘Secondary’ in ‘Participant Transfer Details’ screen.

The assignment validations are applied at the LT-LS Interface level and if any validations are met, then dual authorization is mandatory

Industry Code

Specify the industry code here. The adjoining option list displays all industry codes maintained in the system. You can choose the appropriate one.

CLP Ext Participation

Select this check box to indicate that the external and silent participations are allowed at the tranche level. However, you can modify it.

INIT Mode

You can indicate the mode of initiating the tranche contract in the system. The following options are available:

For more details on this screen, refer the heading ‘Forward Event Processing’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

Part. SSI Pick Up

You can specify the basis for picking up the SSI (Standard Settlement Instructions) Mnemonic for participants of the tranche contract. The options are given below:

For more details on this screen, refer the heading ‘Specifying participant details for the tranche’ in this chapter.

Fronting Share

By default the Fronting Share is 100% indicating that your bank is the only fronting bank. You can specify your bank’s share of Fronting, in case of multiple fronting banks are involved.

Note

The system displays the fronting share as 100% only if you have selected the ‘LC Front­ing’ check box. Otherwise, it display the share as 0%.

Fronting risk is computed at the tranche level during batch process as follows:

Available LC Sublimit * Percent of deal that is Fronted (%) * Fronting Share (%)

Administrator

You can indicate the officer assigned to be the administrator for the borrower tranche or drawdown. By default, the primary administrator defined for the facility contract defaults here. You can change it at the tranche level.

Agreement Title

The customer may require a loan for a specific purpose. In this field, you can capture the reason for processing the loan. The title captured for the facility contract is displayed for the tranche as well. You can change this title for a tranche.

Internal Remarks

The remarks captured for the facility contract is applicable to all the tranches processed under it. You can change the remarks for a tranche, if required.

LC Fronting

Select this check box to indicate that the LC fronting is applicable for the tranche. If you have not selected this check box, the LC fronting value will be displayed as 0 %.

Floor/Ceiling Restricted to Base Rate

This is defaulted from the product maintenance whenever a new tranche is created. You can edit this before authorization or before any floor/ceiling is maintained for the tranche, After authorization you cannot edit this field.

If this check box is selected for the tranche contract it indicates that floor/ceiling can be maintained only for base rate. If this check box is not selected it indicates that floor/ceiling can be maintained for any of the components like base rate, margin and all-in rate.

Floor and Ceiling maintenance for base rate is done at tranche level for each currency, effective date, drawdown product and the associated interest component combination. If this check box is selected for the tranche, for each of this combination, the floor and ceiling maintenance is allowed only for base rate.

Global LC Sublimit

Specify the total global LC sublimit level of the tranche.

FpML Type

Select this check box to indicate that the FpML type is required for the tranche contract.

Inactive

If you have liquidated a tranche for which interest is due on the linked drawdown or fee is due on linked commitment/facility, the system selects this check box. You are allowed to perform the following operations only, on the tranche/drawdown contracts linked to an inactive tranche:

The system automatically deselects this check box during the End of Day (EOD) batch if all the below conditions are satisfied:

If the check box is deselected for the liquidated tranche then no activities are allowed for the tranche or drawdown contract.

The preference maintained here is used to determine if the following loan events are to be held or not in the Intellect Browser:

Oracle FLEXCUBE Action

Oracle FLEXCUBE Events

Intellect Action

Remarks

New loan booking (New Deal) OR

PRAM to introduce a new participant

BOOK/INIT

LOAD

Event from LB-OL STP

Reversal/Cancellation

REVC

CANCEL

Event from LB-OL STP

Value dated amendment to increase maturity date/ Principal amount greater than zero

VAMI

AMEND

Event from LB-OL STP

Value dated amendment to decrease maturity date/ Principal amount to zero

VAMI

BRK

Event from LB-OL STP

Rollover

ROLL

ROLL

Event on stan­dalone OL

Rate Change

RTCH

AMEND

Event from LS-OL STP

Contract amendment

CAMD

AMEND

Event on stan­dalone OL

 

Note

Events performed on the standalone OL contract are not held in the intellect browser and are fed to intellect without manual intervention.

 

5.8.4.3 Specifying the Rounding Details

Rounding Rule

Indicate the currency rounding rule that must be applied to round off interest amounts in the selected currency, for the main interest component. The following options are available in the drop-down list:

5.8.5 For more information on Rounding Rule, refer to Specifying the Rounding Details section in Loan Syndication Contracts - Part 2 chapter.Viewing Self Participant %

The system displays the Self Participation % for Non-Lead tranches only.

The Self Participation % is calculated as follows:

Where,

5.8.6 Specifying Holiday Treatment for Value Date/Maturity Date

In this section of the screen, you can specify the holiday treatment preferences for value dates and maturity dates of contracts falling due on holidays defined for the branch. The holiday treatment details maintained for the tranche product will default to the contract. You can change your preferences at the tranche level.

For more details on the options available, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

5.8.7 Specifying Commitment Fee

If a borrower has availed money from the participant by means of swing line, you can process commitment fee on unutilized tranche amount based on the include swing and exclude swing options.

For the tranches having the swing line drawdown, you can calculate commitment fee using the following options available at the tranche contract level:

Include swing

Select this option to indicate that during calculation of commitment fee swing line drawdown should be considered.

Exclude swing

Select this option to indicate that during calculation of commitment fee swing line drawdown should not be considered.

Note

You can set the commitment fee including swing line drawdown option while booking the new tranche contract and you cannot change it during the contract amendments.

Internal GL

Select the internal GL to be used for swing line drawdowns from the list of accounts.

For more details on swing line refer ‘Loan Syndication – An Overview’ chapter under Loan Syndication.

Example

Tranche Amount – USD 50 mio

Participant

Asset sharing ratio %

Available Limits (USD mio)

CITIBANK

30

15

BAR­CLAYS

50

25

NATWEST

20

10

 

On 01-Jan-2006, a swing line drawdown for 30 mio is entered under this tranche. BARCLAYS and NATWEST are participating in this swing line drawdown amount.

Participant

Asset sharing ratio in %

Share in DD

Tranche Available amount (USD)

CITIBANK

0.00

Nil

15

BAR­CLAYS

66.67

20

5

NATWEST

33.33

10

Nil

 

On 03-Jan-2006 the above swing line (DD) contract would be closed and new DD (normal) contract would be initiated. Hence on 03-Jan-2006 the asset sharing ratio looks as below:

Participant

Asset sharing ratio in %

Share in DD

Tranche Available Limits (USD)

CITIBANK

30

9

6

BAR­CLAYS

50

15

10

NATWEST

20

6

4

 

If you select exclude swing line option, commitment fee at the tranche level is calculated without considering the swing line contract.

If the commitment fee rate to be applied is 0.25%, then on 03-Jan-2006,

Commitment fee = 50,000,000*.25/100*2/365 = 684.93

Participant

Asset sharing ratio in %

Fee amount

CITIBANK

30

205.479

BAR­CLAYS

50

342.465

NATWEST

20

136.986

 

If you select include swing line option, commitment fee at the tranche level is calculated by including the swing line contract.

Commitment fee = 20,000,000 * 0.25/100*2/365 =273.9726

This commitment fee would be distributed to the participants based on the availability ratio w.r.t each participant.

Participant

Tranche available Amount (USD)

Availability Ratio in %

Fee amount

CITIBANK

15

75

205.47945

BAR­CLAYS

5

25

68.49315

NATWEST

0

0

0

 

5.8.8 Specifying Interest/Fee Distribution Method

You can indicate the method in which the interest and fee components have to be distributed among the participants when an assignment is executed before the liquidation date.

Note

5.8.9 Specifying Tax Details

FATCA Waiver

The system defaults the preference maintained at the ‘FATCA/Chapter 3 Waiver’ screen. However, you can modify it.

Grand Fathered

Select this check box to indicate that grandfathered status should also be considered when the payments are being made under the drawdown contracts.

Chapter 3 Waiver

The system defaults the preference maintained at the ‘FATCA/Chapter 3 Waiver’ screen. However, you can modify it.

Grandfathered Effective Change Date

If you have modified the ‘Grandfathered’ option by amending the tranche and when the grandfathered option is changed to ‘NO’, then specify the effective date of change. If the grandfathered option is change, then authorization process undergoes dual authorization.

The system calculates the tax based on the logic given below considering the FATCA and Chapter 3 Tax rules waiver option:

5.8.10 Maintaining Details in the ‘Schedule’ tab

You can maintain the schedule preferences in the ‘Schedule’ tab of the screen.

 

5.8.10.1 Specifying Processing Rules for the Tranche

You can define the processing rules for each of the following:

Repayment

The repayment processing rule for drawdowns default from the tranche product. You can change it at the tranche level. This becomes applicable to all drawdowns under the tranche.

You can select a rule from the following options:

Tranche Amount: 50,000 USD

Dates

Tranche Reduction Schedule

Tranche Available Amount

Drawdown Repayment Schedule

Drawdown Outstanding Amount

31-Mar-04

 

50,000

 

20,000

30-Apr-04

10,000

40,000

10,000

10,000

31-May-04

10,000

30,000

10,000

0

30-Jun-04

10,000

20,000

 

 

31-Jul-04

10,000

10,000

 

 

31-Aug-04

10,000

0

 

 

 

Example

Tranche Amount: 50,000 USD

Dates

Tranche Reduction Schedule

Tranche Available Amount

Drawdown Repayment Schedule

Drawdown Outstanding Amount

31-Mar-04

 

50,000

 

20,000

30-Apr-04

10,000

40,000

4,000

16,000

31-May-04

10,000

30,000

4,000

12,000

30-Jun-04

10,000

20,000

4,000

8,000

31-Jul-04

10,000

10,000

4,000

4,000

31-Aug-04

10,000

0

4,000

0

 

Tranche Amount: 50,000 USD

Dates

Tranche Reduction Schedule

Tranche Available Amount

Drawdown Repayment Schedule

Drawdown Outstanding Amount

31-Mar-04

 

50,000

 

20,000

30-Apr-04

10,000

40,000

 

20,000

31-May-04

10,000

30,000

 

20,000

30-Jun-04

10,000

20,000

 

20,000

31-Jul-04

10,000

10,000

10,000

10,000

31-Aug-04

10,000

0

10,000

0

 

Drawdown Expiry

You can define the last date upto which you can process drawdowns at the tranche level. This is captured in the ‘DD Expiry Dt’ field in the ‘CONTRACT’ tab of the screen. Beyond this date, the system does not allow you to process fresh drawdowns under the tranche. On this date, the system cancels the un-drawn portion of the tranche and cascade the cancellation amount to the remaining tranche reduction schedules based on the expiry processing rule which defaults from the product. However, you can choose a different rule at the tranche level. The options are:

The system checks if the aggregated expected principal of all drawdowns is within the new tranche available amount (Original Tranche Amount – Cancellation Amount) for all future dates. The system displays an override if the amount is not within the new tranche available amount.

For more details on the above rules, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

On the drawdown expiry date, after the tranche is closed, the system will automatically check the ‘Drawdown Expiry’ option in the ‘CONTRACT’ tab of the screen. This indicates that you cannot process any more drawdowns under the tranche.

Grace Days

For a tranche contract, system defaults the value of ‘Grace Days’ maintained at the borrower tranche product level. However, you can modify this value during contract input and contract amendment. During contract amendment, the amended value is applicable to future drawdown linkages and future schedules only.

Cancellation

At the tranche level, you can define a rule for tranche cancellation processing also. This is similar to the drawdown expiry date processing discussed above. The only difference being that, while the later is triggered automatically on the drawdown expiry date, the cancellation processing has to be initiated manually.

The cancellation rule defaults from the product. You can override the default rule and choose a different rule at the tranche level. The options are:

For more details on the above rules, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

You have to use the ‘Tranche Cancellation’ screen to initiate the cancellation processing.

For more details on this screen, refer the heading ‘Cancelling a tranche’ in this chapter.

Prepayment

For a tranche, you can select a rule based on which prepayments for drawdowns are processed in Oracle FLEXCUBE. The system rebuilds the reduction schedules based on the rule specified here.

The options available are:

Tranche Repayment Rule

Select the repayment rule that gets defaulted to scheduled repayments, unscheduled repayments and prepayments.

The possible options are as follows:

FIFO will be selected by default.

The logic of the above rules are same as in drawdown expiry processing and tranche cancellation processing.

For more details on the above rules, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

Note

The system performs the following on prepayment:

Reduction Schedule Application

Select this check box to indicate that reduction schedule is applicable for a tranche. After you select this option, you cannot deselect it. Once you select this, you need to define the reduction schedules before you save the contract.

For more details on this, refer the heading ‘Defining reduction schedules for a tranche’ in this chapter.

Auto Repay Schedule

You have to select this option to instruct the system to automatically rebuild the existing drawdown repayment schedules in case of a repayment/prepayment. The manner in which the system applies this option is discussed below:

For more details on processing drawdowns, refer the heading ‘Processing a drawdown’ in this chapter.

5.8.10.2 Specifying Holiday Treatment for Schedules

In this section of the screen, you can specify the holiday treatment preferences for the repayment schedules falling due on holidays defined for the branch. The holiday treatment details maintained for the tranche product defaults to the contract. You can change your preferences at the tranche level.

Note

The system redefines the future schedule dates for Principal, Fees, and Interest compo­nents based on the changes you make.

If you have maintained commitment reduction schedules for the tranche, you can apply the holiday treatment preference for the reduction schedules as well. To enable this, you have to check the ‘Move Comm Redn Sch’ option for the tranche.

For more information on the holiday treatment options available, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

5.8.10.3 Specifyng Transfer Fee

CCY

Specify the currency details.

Amount

Specify the amount details.

5.8.10.4 Specifying Special Amount Details

Collateral Account

You can capture the borrower collateral account in order to facilitate the special amount disbursal or special amount payment. You can also capture the internal Cash DDA collateral account.

5.8.10.5 Indicating Agency Type

The agency type of the transaction is defaulted from Facility Contract Online. However, you can modify this at the time of booking the new tranche under the facility.

Note

Upon the first authorization of the Tranche contract, you are not allowed to amend this field.

5.8.10.6 Specifying Schedule Details

You can define reduction schedules in the ‘Schedules Details’ section of the screen. You can also define payment schedules for fee components, if attached to the tranche. The schedules defined for the tranche product defaults here but you can modify the default values.

Select the Schedule Details and click 'Add Row' button and add the schedule details.

Schedule Type

You have to identity the schedule type being defined. For defining reduction schedules, select ‘C’. If you want to define payment schedules for fee components, select the option ‘P’.

Component

Select the component for which you are defining the schedule details. All the fee components associated with the contract are available in the option list provided. If you are defining reduction schedules, select the ‘PRINCIPAL’ component.

Note

For fee components of type ‘Advance’, the system does not allow you to define multiple schedules for the same fee component. However, you can define multiple instances if only bullet schedule exists for the component.

Start Date and End Date

This is the period for which selected fee component will be applied for the contract. This period should be within the tranche start date and end date. By default, the start date is equal to the tranche start date.

Frequency

This indicates the frequency/interval at which the schedules fall due. The available frequencies are:

Note

You can select the ‘Bullet’ frequency for defining reduction schedules.

Unit

Unit of frequency identifies the number of occurrences within a frequency . Unit ‘2’ and Frequency ‘Monthly’ means bimonthly frequency that is, the event occurs once in 2 months.

No

Based on the frequency and the unit of frequency you specify, the system displays the number of schedules for the period within the start date and end date. For instance, consider the following:

Then, the system displays the number as 9 since there are nine such schedules for the period.

Percent/Amount

You can specify a percentage or an amount for each payment/reduction schedule. If you specify the percentage, system computes equivalent amount and vice-versa. Based on this Oracle FLEXCUBE determines the available amount and then build the reduction schedule for the tranche.

Note

If you are not specifying the interest schedule details here, the system accepts the details maintained at the drawdown product level.

You can specify the amount due for each schedule for fee components of type ‘User Input’.

5.8.10.7 Specifying Collateral Settlement Mnemonic

Specify the following details:

Collateral Settlement Mnemonic

Specify the collateral settlement mnemonic to the margin desk account. The adjoining option list displays all mnemonics that are maintained for the collateral settlement customer. You can select the appropriate one.

Collateral Online Mnemonic

Specify the collateral online mnemonic to the margin desk account. The adjoining option list displays all mnemonics that are maintained for the collateral online customer. You can select the appropriate one.

5.8.10.8 Viewing Tranche Payment Schedule Details

Based on the payment schedules captured for the components, Oracle FLEXCUBE computes the schedule and the amount payable for each schedule in the ‘ Schedule Details’ screen.

To view the details, click ‘Explode Schedules’ button from ‘Schedules’ tab.

You can select a due date to view the components and the amount settled on that date.

5.8.10.9 Viewing Reduction Schedule Details

Similarly, based on the reduction schedule parameters captured, Oracle FLEXCUBE computes the reduction schedules. You can view the schedules in the ‘Tranche Reduction Schedules’ screen. Click ‘Commitment Reduction Schedules’ button from ‘Schedules’ tab.to view the details.

The following example explains a reduction schedule.

Example

Consider a tranche of USD 100,000.00 valid from 01-Jan-2004 to 31-Dec-2004. The schedule details for the same are given below:

Start Date

End Date

Number

Frequency

Unit

Percentage

31-Jan-04

31-Dec-04

11

Monthly

1

8.5%

31-Dec-04

31-Dec-04

1

Bullet

1

6.5%

 

Based on the above information, Oracle FLEXCUBE shows the below reduction schedule :

Start Date

Tranche Available Amount (USD)

Percentage

Reduction Amount

31-Jan-04

100,000.00

8.5%

8,500.00

29-Feb-04

91,500.00

8.5%

8,500.00

31-Mar-04

83,000.00

8.5%

8,500.00

30-Apr-04

74,500.00

8.5%

8,500.00

31-May04

66,000.00

8.5%

8,500.00

30-Jun-04

57,500.00

8.5%

8,500.00

31-Jul-04

49,000.00

8.5%

8,500.00

31-Aug-04

40,500.00

8.5%

8,500.00

30-Sep-04

32,000.00

8.5%

8,500.00

31-Oct-04

23,500.00

8.5%

8,500.00

30-Nov-04

15,000.00

8.5%

8,500.00

31-Dec-04

6,500.00

6.5%

6,500.00

 

Note

This validation is done under the following conditions:

Each of the vertical buttons in the screen is explained below in detail.

5.8.11 Specifying Currency Details for the Tranche

You can specify all details pertaining to the contract currencies (allowable currencies for the tranche) in the ‘Currency Details’ sub-screen. To invoke this screen, click ‘Currency’ tab in the ‘LB Tranche Contract Online’ screen.

 

The details include the following:

The details defined for the tranche product will default here. You can change the system defaulted details at the tranche level.

For a detailed explanation of the options available in this screen, refer the heading ‘Specifying Additional Preferences for Loan Syndication’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

5.8.12 Specifying Borrowers for the Tranche

You must specify the borrowers for the borrower tranche, who will actually be availing the drawdowns under the tranche. The borrowers defined for the borrower facility under which the tranche is being entered, will be defaulted to the tranche. You can view the borrower details in the ‘Borrower Details’ sub-screen. Click ‘Borrower’ tab to invoke the screen.

 

You cannot add a borrower at the tranche level. You may, however, remove a borrower from the tranche. You have to click ‘Delete Row’ button to do this. When you click on this button, the system displays a message to seek confirmation for the deletion.

The borrower details get defaulted along with the currency mnemonics and entities for each borrower.

For more details on the above details, refer the heading ‘Specifying borrowers for the facility’ in this chapter.

In addition, at the tranche level you can specify the following:

Nature of SSI

You can specify the nature of the SSI for each borrower. The available options are:

Note

The SSI selected for the borrowers get displayed in the settlement details screen for the tranche and all the drawdowns processed under it.

Netting Preferences

You can specify netting preferences for tranche borrowers only if you check the ‘Net Across DD’ option (in the ‘CONTRACT’ tab of the ‘LS Tranche Contract Online’ screen).

The available netting options are:

Blocked

You can select this option if you want to prevent a borrower from availing loans under the tranche.

5.8.12.1 Selecting DD Products and Defining Currency Wise Limits for Each

For a tranche, you can select drawdown products and create sub limits for each DD product selected for a borrower. In effect, you can define a product wise limit for each borrower beyond which the system displays an override. These details are maintained in the ‘Product Currency’ tab of the ‘Borrower Details’ screen.

 

In this screen, you have to select the following:

Limit Type

Select the type of the limit for which you want to specify the limit amount, from the drop-down list provided.

You need to select ‘Swing Line’ limit to specify currency limit for swing line drawdowns.

Note

You can specify only one swing line limit for the borrower across all drawdown products and currencies. Hence, you need to select DD product as ‘ALL’ and currency also as ‘ALL’ for Swing Line type of limits.

DD Product

You can select drawdown products for each borrower of the tranche. To do this, select the borrower, and then associate the drawdown products with the borrower. The drawdown products associated with the main facility product (as part of the facility product preferences) are available in the option list. When you select the product, the name of the product is displayed in the adjacent field.

Similarly, you can select the DD products for each borrower.

Currency

For each drawdown product, you can maintain a list of allowed currencies. However, you can choose the currencies only from the allowed list of currencies maintained for the main facility contract. You cannot add a new currency to this list.

To maintain the list of allowed currencies, highlight the DD product and then choose the currency from the option list. Upon selection of the currency, the description is also displayed.

Limit Amount

You can maintain currency wise limits for every DD product selected for a borrower of the tranche. You can capture the limit amount against each currency. This amount should be between the minimum and maximum drawdown amounts maintained for the tranche.

5.8.12.2 Specifying the Sublimits

You can maintain sublimit for all LC products and specific to a currency for all borrower products and the borrower sublimit is tracked against all LC products.

System defaults the value of Limit type as sublimit to maintain the limit for individual product or all product not both. In addition, system maintains the limit for individual currencies or “ALL” currency, not for both.

If Specific DD Product and Currency limit with Limit Type as “Sublimit”is already maintained for the borrower, then system will not allow another record with “ALL” DD Product Option. If Single Limit is maintained with “ALL” currency option then Limit will be tracked with Tranche Currency. If Limit type is Chosen as “ALL LC”, then the system will allow to maintain the limit for “ALL” product only, not for individual product. If “Sub Limit” or “ALL LC” limit is maintained for “ALL” currency, the limit amount is tracked in the tranche currency and the limit amount in this case can not exceed the tranche amount.

In case of rollover with the additional principal or rollover with different exchange rate or both the additional utilization impact will be validated during rollover child contract creation.

When you process drawdowns under the tranche, the system checks for the following:

At the tranche level, you can view the borrower limit details and the utilization against the same in the ‘Borrower Sub Limit At Tranche Level’ screen.

 

You can invoke the 'Borrower Sub Limit At Tranche Level’ screen by typing ‘LBDBRLMT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

You can also invoke this screen, by going to ‘LB Tranche Contract Online’ screen, clicking ‘Borrower and then clicking ‘Borrower Details’.

 

This screen displays the following:

5.8.12.3 Viewing Standard Settlement Instructions for Borrowers

Just as at the facility level, at the tranche level too, you can view the summary of the standard settlement instructions (SSI) maintained for the borrower and currency combination. Select the borrower whose SSI details you want to view from ‘Borrower Details’ screen and click ‘Settlement Instructions’ button.

You can invoke the ‘Settlement Instructions View’ screen by typing ‘LBDINSVW’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

The details are displayed in the ‘Settlement Instructions’ screen as shown below:

 

Click ‘Exit’ button to exit and return to the main screen.

5.8.13 Maintaining Participant Details for the Tranche

You must also identify the participants who contribute to the amount being committed for disbursement under the borrower tranche contract, and specify the contribution details. The participants defined for the borrower facility contract under which the tranche is being entered, defaults to the tranche, and you can change the participants, if required. You can capture the participant details in the ‘Participant Ratio Details’ screen.

Click ‘Participants’ tab in the ‘LB Tranche Contract Online’ screen.

 

In this screen, you can also view the various components (Interest, charge and fee) associated with the product if only if the ‘Participant Propagation Required’ option is selected for the component when associating the same with the product.

Note

You can only remove a participant from the tranche. Addition of a new participant can be done only at the facility level.

For more details on adding a participant to a facility, refer the heading ‘Adding a new participant’ in this chapter.

You can specify the following participant details:

Participant Name

Names of the participants involved in the tranche are displayed in the alphabetical order.

Note

If a participant name is too long, it is maintained in two different fields in the ‘Customer Information Maintenance’ screen. These two name fields will be concatenated while dis­playing in the above screen.

Refer the Core Entities user manual for more details on the ‘Customer Information Maintenance’ screen.

Participant Code

The IDs of all the participants selected for the borrower facility contract will be displayed here. To remove a participant from the tranche, select the same and then click the ‘Delete Row’ button. You can include the participants removed from the tranche through the ‘Participant Selection’ screen.

For more information on this screen, refer the heading ‘Selecting participants for the facility’ in this chapter.

Asset Amount/Asset Ratio

You have to specify the contribution of each participant to the tranche contract. You can specify the participant contributions either as an amount (Asset Amount) or a percentage (Asset Ratio). If specified as an amount, the sum of all contributions must not be greater than the tranche contract amount. If a percentage is specified, the sum of percentages for all participants must not exceed one hundred percent.

When you specify the asset amount, system will compute the equivalent ratio. Likewise, when you capture the asset ratio, its equivalent amount is also displayed. In addition, the income sharing ratio for interest, ad-hoc fee and charge components, if applicable, is displayed based on the asset amount/ratio. You can change the ratio for these components but the sum of percentages for all participants must not exceed one hundred percent.

Self Participant

Check this box to indicate that the participant is a Self Participant. A self participant is one who is leading the loan contract. This option is defaulted based on the self participant maintenance. You can check this option if it is maintained in the self participant maintenance. You can uncheck this option to proceed.

Originator

Select this check box to indicate that the Self Participant is the originator. This is enabled only if the ‘Self Participant’ check box is selected.

You can mark only one self participant as the originator.

If you are entering a drawdown schedule, you can change this specification for a participant only if you have not checked the ‘Cascade Participants’ option for the tranche product used by the tranche contract.

Netting Preferences

You can specify netting preferences for tranche participants only if you check the ‘Net Across DD’ option (in the ‘CONTRACT’ tab of the ‘LS Tranche Contract Online’ screen). The available netting options are:

If you do not check the ‘Net Across DD’ option, the netting preference will be set to ‘NONE’ and you will not be allowed to change the same.

SSI Mnemonic

The SSI Mnemonic selected for the facility contract defaults for each participant of the tranche. However, you can change it at the tranche level. The option list displays the SSI Mnemonics maintained for the Counterparty, Module, Currency, Product and Branch combination involved in the tranche.

You also have the option to select component wise or currency wise SSI Mnemonics for each participant of the tranche. This is discussed below:

5.8.13.1 Specifying Currency Wise

Currency wise Mnemonic details can be given in Pariticpant Ratio Details screen.

If the basis of SSI pick up is ‘Currency’, you can select the SSI Mnemonic for each allowable currency for each participant. Follow the steps given below:

  1. Select the participant from the list of participants
  2. Select the currency from the option list will display the allowable currencies for the tranche.
  3. Select the SSI Mnemonic for the currency
  4. Click ‘Add Row’ button to select the next allowable currency, if any. To delete a currency, click ‘Delete Row’ button.
  5. After specifying the currency wise SSI Mnemonic for a participant, select the next participant from the list

5.8.14 Linking the Commitment Contract to the Self Participant

You can link the L&D commitment contract (created by means of Rapid updates) to Self participant and block the commitment booking as part of tranche contract booking. To do this click ‘Linkages’ tab and the ‘Participant Commitment Linkage’ section is displayed as follows:

Enter the following details:

Participant

The participant name to which the OL commitment contract has to be linked is displayed in this field.

Commitment Reference Number

Choose the commitment reference number to be linked to the self participant from the list of commitment numbers.

GFRN

The system displays the GFRN associated with the credit line which is linked to the commitment selected. If the system is not able to find the GFRN, this field will display a null value.

5.8.15 Maintaining Currency Restriction for Participants

Oracle FLEXCUBE enables you to maintain restrictions on the participants for the currencies involved at the time of a transaction. Participants maintained for a currency will be allowed to make any transaction involving that currency to the extent of the defined limit amount of the given currency.

You can maintain restriction on the participants using the ‘Participant Limit’ screen. To invoke this screen, click ‘Participant Limit’ in the ‘LB Tranche Contract Online’ screen.

 

In this screen, you can specify the currency and participant details.

Currency Details

In this section, you can select the currencies for which you want to maintain restriction on the participants.

You need to select the limit type from the drop-down list provided. For swing line drawdowns, you need to select ‘Swing Line’ as the limit type. The existing currency limits for the participants can be specified under the limit type ‘Sub Limit’. You can select the limit type as ‘ALL LC’ option for maintaining the LC sublimit for ‘ALL’ product and ‘ALL’ currency and not for individual currencies.

Note

You need to select ‘ALL LC’ option only for the LC issuers.

You can select the currencies from the list of values. The values displayed in this list are based on the currencies maintained in the ‘Currency Details’ screen for tranche contracts. Once you select the currency, the corresponding description is displayed.

Currency Restrictions can be maintained for all allowed currencies other than the Tranche currency.

Note

Participant Details

In this section, you can specify the participants who are eligible to make transactions using the selected currency. In other words, participants maintained for a currency is allowed to make any transaction involving that currency to the extent of the defined limit amount of the given currency.

The system calculates and display the LC issue % based on the amount specified in the ‘Limit Amount’ and ‘Global LC Sublimit’ fields. However, you can modify it. If you modify the %, the limit amount is calculated and displayed in the respective field.

The system will calculate and display the limit amount based on the LC issue % and Global LC Sublimit. However, you can modify it. If you modify it, the LC issue % is calculated and displayed in the respective field.

The limit amount should be specified in the tranche currency only.

Note

Example

Case 1

Let us assume the following scenario:

Tranche amount: USD 100 mio

Asset Sharing Ratio (ASR) of each participant: 10% (USD 10 mio)

Number of participants: 10 (P1 – P10)

Currency Restriction: P1, P2, P3 and P4 can make transactions only using the currency CAD.

Total permissible amount for the 4 participants = 40 mio (USD 10 mio each)

Assume there is a drawdown in CAD for 20 mio. This is shared between the 4 participants in the ratio 25% each. Therefore, the ASR for each of the 4 participants are CAD 5 million. Let us assume the USD equivalent of CAD 5 mio is USD 3 mio. Thus the availability amount for each of these participants for future drawdowns will be 7 million (10 mio – 3 mio).

Note

In this scenario, the drawdown amount in CAD was less than the equivalent of USD 40 million.

Case 2

Let us assume a scenario where the drawdown amount in CAD currency is equal to USD 40 mio. If P1, P2, P3 and P4 have participated to an extent of USD 40 mio each, these participants are not allowed to participate in any future drawdowns. The future drawdowns are shared amongst the remaining participants.

System executes the following validations while maintaining currency restrictions:

Note

5.8.16 Identifying Participants as Issuers of LC

At the time of booking a tranche, you can capture the participants of the tranche as issuers of LC in the ‘LC Issuer Mapping Details’ screen. Click ‘LC Issuer’ tab to invoke this screen.

 

The LC Issuance Fees are paid to only those participants who are identified as issuers of LC. This fee is computed on the outstanding amount of all the LC drawdowns for that issuer. The customer codes and the names of all participants of the tranche are displayed here. You have to associate each possible issuing bank with an Issuing Bank Number. At a time, you can associate a maximum of ten participants with issuing bank numbers. The drop-down list consists of numbers ISSUER1, ISSUER2 up to ISSUER10. This list defaults to all LC type of drawdowns processed under the tranche. At the drawdown level, you can select an LC issuer from this list.

Note

You need not associate an issuing bank number if a participant is not an issuing bank

5.8.17 Maintaining Drawdown Product Details for the Tranche

Click ‘DD Product’ tab in the ‘LB Tranche Contract Online’ screen to specify the drawdown product details.

 

The details you can capture in this screen are discussed below:

5.8.17.1 Selecting Borrower Drawdown Products

To process drawdowns under the tranche, you have to select the drawdown product at the tranche level. The option list displays all drawdown products that you have associated with the facility product (under which the parent facility contract is processed) through the ‘Borrower Facility Product – Preferences’ screen.

When you select the product, the following details are displayed:

Interest Rate Rounding Rule

Select the interest rate rounding rule from the adjoining drop down list. Select one of them from the drop down list:

The rounding rules applied for the interest rate picked up automatically during Drawdown transactions are given below:

5.8.17.2 Selecting SSI Mnemonics for Each Component

You have to associate an SSI Mnemonic for each participant and component combination. The system uses this information for component wise settlement of Income for each participant. The option list will display the following details about the SSIs:

Note

If you do not define the SSI Mnemonics, system will apply the default values and display an appropriate message to indicate the same.

5.8.17.3 Margin Details

The margin, if maintained for the interest components defined for the borrower drawdown product (in the ‘Interest Definition’ screen), gets defaulted at the tranche level. The following details are displayed:

5.8.17.4 Default Interest Schedules

Here you can specify the default interest schedules for each interest component of a drawdown product. The schedule maintained here gets defaulted to any new drawdown under the respective product.

Reference

Select the reference on which you want to schedule the interest from the drop-down list provided.

Frequency

Select frequency on which you want to schedule the interest from the drop-down list provided.

Frequency unit

Select the unit of frequency on which you wish to schedule the interest from the drop-down list provided.

Month

Select the month on which you want to schedule the interest from the drop-down list provided.

Date

Select the date on which you want to schedule the interest from the drop-down list provided.

Note

This Interest is only for the Interest Component of a Normal contract. It is not applicable for Principal Component. Also this schedule is not be applicable for PIK Margin compo­nent.

5.8.18 Maintaining Margin Details

You can view and modify the margin details in the ‘Margin’ tab of the ‘DrawDown Products’ screen.

The margin, if maintained for the interest components defined for the borrower drawdown product (in the ‘Interest Definition’ screen), gets defaulted at the tranche level. The following details are displayed:

Exception Tracking

Exception tracking is done for the required independent margin components chosen by you here. If the actual margin charged to the borrower for the said tranche is different from the specifications maintained by you (which you would have done through the ‘Borrower Rating Maintenance’ screen), you can check the same from a periodic exception report.

Note

An override message gets displayed if the actual margin is greater than the maintained margin (done through the ‘Borrower Rating Maintenance’ screen) while saving a new drawdown contract.

For more details on maintaining margin details for a DD product, refer the heading ‘Defining Interest Components for Borrower Tranche /Drawdown Products’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

At the tranche level, you can add/delete the margin components associated with the interest component. In addition, you can change the ‘Default Margin Rate’ for margin components of ‘Drawdown’ basis. You can define the Slab/Tier structure for margin types of ‘Tranche’ basis in the ‘Margin Maintenance’ screen.

For more details on this screen, refer the heading ‘Maintaining Slab/Tier structure’ in this chapter.

Click ‘Ok’ button to save the details and exit the screen.

5.8.18.1 PIK Margin Calculation

PIK Margin component gets added in ‘Margin Definition Screen’ with Margin Basis as Drawdown and PIK Margin flag as checked. PIK Interest component gets created with Rate type as “Fixed” with User Input. It is not a main interest component. This is maintained in ICCF Class Screen invoked from ICCF Maintenance; PIK Component flag is checked.

PIK Interest Component will be attached to the Borrower Drawdown Product by linking the PIK Margin Component.

While booking a drawdown with PIK Interest Component system computes the PIK Amount by considering the rate maintained for PIK Margin Component and Basis Principal Amount of the drawdown contract using the below formulae:

Calculated PIK Amount = Basis Amount (LOR Amount at Maturity) * Rate (PIK Component Rate)* No of Days/ Day Basis

You need to maintain the PIK Margin Rate attached to the PIK interest component during drawdown booking. PIK amount gets re-calculated once the bullet schedule is input and PIK amount calculated on the basis of above formulae and basis amount always be considered as the latest outstanding amount of the drawdown. Please to example attached in annexure.

Basis amount for the interest calculation for Participant contracts are the current drawdown outstanding * latest asset ratio of the participant.

While capturing a Rollover on a drawdown contract system will consider the PIK Margin rate maintained for calculating the PIK Rollover Amount. PIK margin rate for the drawdown can be changed by performing CAMD (Contract amendment). New rate is applied from the value date of the contract for calculation of PIK amount.

When the tranche PIK margin is changed, then during the EOD batch the same margin rate is applied on the Drawdown’s under the Tranche. The drawdown contract with “PIK Rollover with capitalization” as selected is excluded from the margin batch processing, only for Tranche PIK margin component.

PIK margin component can be paid from Manual Payment screen as well during the complete Principal is being paid. PIK interest is recalculated when “PIK Rollover with capitalization” is checked or unchecked.

5.8.18.2 Maintaining Margin Slab/Tier Structure

The margin components, if maintained for the interest components associated with the tranche product, will default to the ‘Margin’ tab of the ‘DrawDown Products’ screen. In the ‘Margin Maintenance’ screen you can define the Slab/Tier structures (for tranche utilization percentage) with different effective dates for margin types of ‘Tranche’ basis.

Click ‘Margin’ tab to invoke this screen. Margin of all drawdowns will be based on the percentage utilization of the tranche.

 

You have to specify the following details to maintain the Slab/Tier structure:

Contract Ref No

Select the contract reference number from the option list. The option list displays all the validcontract reference numbers.

Customer No

Select the borrower for whom the margin details have to be maintained. The option list displays the borrowers selected for the tranche. The margin details are applicable to drawdowns processed for the selected customer. You can also select the ‘ALL’ option to indicate that the margin details are applicable to all the borrowers of the tranche.

Component

The option list displays the margin types of ‘Tranche’ basis, if the same is applicable for the drawdown products selected for the tranche. When you select the component, the description and the component type are also displayed. You cannot amend these details.

Component Type

This field defaults based on you maintenance in the ‘Margin – Definition’ screen.

For more details on this screen, refer the section titled ‘Maintaining margin component details’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

Amount Type

You can define the Slab/Tier structure either in terms of amount or percentage of tranche utilization. Select the appropriate option.

Dept Code

Once the contract reference number is selected, the system displays the applicable department code.

Branch Code

Once the contract reference number is selected, the system displays the applicable branch code.

Treasury Source

Once the contract reference number is selected, the system displays the applicable treasury source.

CCY

Specify the currency details.

Currency Name

The system displays the name of the currency selected.

Effective Date

You must also specify an effective date on and beyond which the specified interest margin is valid in the system. For each effective date, you have to maintain the Slab/Tier structure in the ‘Margin Details’ section of the screen. Margin can also be maintained with an effective date in the past. If you amend the margin between the rate fixing date and the value date, the system will re-pick the margin at the time of drawdown initiation.

Capture the date in ‘DD-MMM-YYYY’ format.

From Amount/Percent

You can maintain different Slab/Tier structures for each effective date captured for the component. Depending on the ‘Amount Type’ you select, whether Amount or Percent, the system displays zero as the ‘From Amount’ or ‘From Percent’ for the first Slab/Tier. For subsequent slabs, the ‘To Amount’ or ‘To Percent’ of the previous slab is displayed.

To Amount/Percent

Capture the upper limit for the various Slabs/Tiers here. For type ‘Amount’, the maximum limit allowed is 999,999,999,999.99. The amount/percent specified here becomes the ‘From Amount/Percent’ for the next Slab/Tier.

Margin Rate

Specify the rate applicable for each Slab/Tier. The rate specified here is applicable on the tranche outstanding amount which varies based on the utilization of the tranche.

Use the navigation buttons - to move from one margin component to another.

For more details on negative rate processing, refer the title ‘Maintaining Loans Parameters Details’ in the chapter ‘Bank Parameters’ in Core Services User Manual.

If base rate is negative or borrower margin rate is negative then system does not allow user to maintain participant margin. If user has captured positive margin rate for borrower and participant then, the system does not allow user to amend the margin rate from positive to negative.

Click ‘Ok’ button to save the details and exit the screen.

5.8.18.3 Specifying Participant Margin Rates

You can capture margin rates for each participant of the tranche by clicking the ‘Part populate’ button on the ‘Margin Maintenance’ screen. The system displays the ‘Participant Margin Maintenance’ screen. Note that you will be able to capture participant margin only if the box ‘Margin for Lender’ is checked in the ‘Loan Parameters’ screen.

All details captured in the ‘Margin Maintenance’ screen are defaulted here.

For a given effective date and currency, you can view the margin maintained for the borrowers and participants.

To add a new participant, click the ‘List of Values’ button. The system displays all participants linked to the tranche. You can specify the margin rate applicable for the required participants from the required effective date.

Note that you can maintain margin rates for participants only for margin components of the main interest components of the Tranche’s Drawdown products.

Place your cursor on a participant and click the ‘Delete Row’ button to delete that participant.

Click ‘Ok’ button to save the details and exit the screen.

The system ensures that the total margin rate of all the participants is the same as the borrower margin rate for the effective date for which margin rate is captured/ amended. It l also check the rates for each participant, margin component, currency, effective date and amount slab combination. You should have computed the required margin rates prior to capturing or amending the margin rate using this screen. If the validation for margin rates fails, the system displays an error message and will abort the transaction. You have to correct the margin rates and then proceed.

5.8.18.4 Application of Margin Based on Percentage/Amount Utilized

Any change in the tranche utilization amount changes the margin percentage applied on the drawdowns based on percentage/amount utilized. The following example illustrates this:

Example

Whenever you process new drawdown under a tranche, it increases the utilization amount for the tranche. The new marginis applied not only for the new drawdown amount but to the existing drawdowns as well. This means the new margin will be applicable to the tranche outstanding.

Assume that you have maintained the following structure for margin application based on utilization:

Tranche Amount: 10M

Tranche Utilization in %

Margin (%)

< 30 %

0.00

> 30 % to < 70 %

0.15

> 70 %

0.25

 

Details of DDs processed and margin applicable is shown in the table below:

Day

DD

Repayments

Outstanding

Applicable Margin (%)

1

5,500,000

 

5,500,000

0.15 (the DD amount falls in the second slab)

10

 

2,800,000

2,700,000

0.00

45

5,000,000

 

7,700,000

0.25 (tranche utilization is greater than 70%)

 

The new margin is based on the total outstanding under the tranche. In case of drawdowns where initiation of the drawdown has not yet happened, Oracle FLEXCUBE provides the margin details in the advices sent to participants. The margin rate indicated in the advices are the margin that is applicable to the borrower at the time of advice generation.

To amend the details, you have to invoke the ‘Margin Maintenance’ screen from the Application Browser.

For details on amending the margin, refer the heading ‘Amending the margin details’ in this chapter.

5.8.19 Defining SKIM Details for Tranche Participants

SKIM refers to the additional interest that is paid or received between tranche participants. The payer, payee and SKIM rates have to captured for the tranche in the ‘Skim Details – Tranche’ screen. Click ‘Skim Details’ button to invoke this screen.

 

The Skim details to be captured in the screen above are discussed below:

5.8.19.1 Specifying Skim Participants

You have to specify the following details in the ‘Skim Participants’ tab of the screen:

Payer Participant

You have to select the participant who makes the Skim payment. The participants associated with the tranche are available in the option list. You may select a participant from this list. When you select the participant, the name of the participant is also displayed.

Receiver Participant

Likewise, you have to select the participant who receives the Skim payment. The participants associated with the tranche are available in the option list. When you select the participant, the name of the receiver is also displayed.

Default Skim Rate

Here, you have to specify the rate applicable for calculating the Skim amount. This rate is applied on the participation amount contributed by the payer. Skim is paid or received as per the Interest schedule. The rate specified here is applied.

Click ‘Add Row’ button to select the next payer participant.

Note

For more details on maintaining Skim components, refer the heading ‘Maintaining Skim components for participants’ in the ‘Defining Products for Loan Syndication’ chapter of this User Manual.

5.8.19.2 Specify Skim Rates for DD Products

You also have the option to specify the Skim rates separately for each DD product. This is done in the ‘Skim DD Product Linkages’ tab of the screen.

 

You have to indicate the following details here:

Product Code

The borrower DD products selected in the ‘DrawDown Products’ screen is available in the option list. Upon selection of the product, the following details are also displayed:

Linked/ Change Allowed

By default, the ‘Linked’ option is selected and you are not allowed to amend the ‘Default Skim Rate’ (as maintained in the ‘Skim Participants’ tab of the screen) for the drawdown products.

To facilitate rate amendment, you have to check the ‘Change Allowed’ option. When you check this option, the ‘Linked’ option is automatically unchecked and vice versa. You can then maintain product wise Skim rates for the tranche.

The Skim details captured at the tranche contract gets propagated to the drawdown contracts processed under it. However, you are allowed to amend the details at the drawdown level.

Click ‘Add Row’ button to select the next DD product from the list.

After making the required amendments, click ‘Ok’ to save the changes and return to the ‘LS Tranche Contract Online’ screen.

5.8.20 Modifying Charge Details for the Tranche

The charge components associated with the tranche product are applied to the contract. You can view the details and makes changes, if required, through the ‘Contract Charge Details’ screen. Click ‘Charge’ tab to invoke this screen.

 

The details pertaining to the following events are displayed:

Charge Association

You can change the defaulted charge rule. You also have the option to waive the rule, if required. Check the ‘Waiver’ option to waive a rule.

Charge Application

This section displays the charge application details like:

The system computes the charge amount as per the rule associated with the charge component. You have the option to change the charge amount or waive the amount completely. If a particular component is already liquidated, the ‘Liquidated’ option will be checked for the same.

Charge Liquidation

The liquidation details are displayed as and when liquidation occurs. The following details will be displayed:

Click ‘Ok’ to save the changes and return to the ‘LB Tranche Contract Online’ screen.

For more details on processing charges, refer the ‘Charges and Fess’ User Manual.

 

5.8.21 Specifying Tranche Fee Details

You can collect utilization fee from the borrowers based on the utilized tranche amount irrespective of the revolving or non-revolving nature of the tranche.

Example: Utilization Fee

Consider a tranche for 10 M USD. You process a drawdown under this tranche for
6 M USD.
Repayment made = 0.5 M
O/S = 5.5 M
Therefore, utilization fee will be calculated on 5.5 M

Similarly, you can also collect unutilized fee or commitment based on the unutilized tranche amount. However, the basis amount on which this is calculated depends upon whether the tranche is revolving or non-revolving. In non-revolving tranche, repayments are not considered whereas in revolving tranches, repayments are considered.

Example

Consider a tranche for 10 M USD. You process a drawdown under this tranche for
6 M USD.
Repayment made = 0.5 M
O/S = 5.5 M

For non-revolving tranche, non-utilization fee will be calculated on 4 M.
For revolving tranche, non-utilization fee will be calculated on 4.5 M.

For LC type of drawdowns, you can also process fee based on the LC outstanding. This is applicable to Commercial and Stand by LCs. LC Issuance fee is paid to the participant who is the issuer of the LC. This fee is computed on the outstanding amount of all the LC drawdowns for that issuer.

You can define the fee structure and the applicable rate at the tranche level in the ‘Fee Rule Maintenance’ screen. Click ‘Fee Rule’ tab to invoke this screen.

 

You have to capture the following details in this screen:

Counterparty

Select the borrower for whom the fee details have to be maintained. The option list displays the borrowers selected for the tranche. The fee details are applicable to drawdowns processed for the selected counterparty. You can also select the ‘ALL’ option to indicate that fee will be applicable to all the borrowers of the tranche.

Fee Rule

Associate a fee rule based on which the system computes the fee applicable on the tranche outstanding amount. The option list displays the fee rules associated with the borrower tranche product. Upon selection of the rule, the following details are displayed:

You cannot change the above parameters for the fee rule.

For information on the other fields in the screen, refer the heading ‘Maintaining Fee Rule details’ in the ‘Processing Charges and Fees’ chapter of this User Manual.

You can associate multiple fee rules with the tranche. To define the next rule for the tranche, you have to click ‘Add Row’ button in the ‘Contract Details’ section of the screen. You can view the various fee components associated with a tranche by clicking on the navigation buttons - provided in the screen.

5.8.21.1 Application of Utilization Fee

The following example illustrates the application of utilization fee based on the Slab/Tier structure.

Example

Consider a tranche for 10 M USD. The fee structure is given below. Further, the calculation assumes 365 days in a year:

Tranche Utilization Amount

Util Fee (%)

< 7 Million

0.00

> 7 Mio to < 9 Mio

0.20

> 9 Mio

0.25

 

Case 1: Calculation based on the Slab structure

Day

Utilization

% Derived from fee structure

Fee Amount

Day 1

5,500,000.00

0.00

0.00

Day2

8,000,000.00

0.20

43.83 (8000000 x 0.20/36500)

Day 3

9,500,000.00

0.25

65.07

 

Case 2: Calculation based on the Tier structure

Day

Utilization

% Derived from fee structure

Fee Amount

Day 1

5,500,000.00

0.00

0.00

Day2

7,000,000.00

0.00

0.00

Day2

1,000,000.00

0.20

5.48

Day2

Total for Day 2 (Util=8,000,000.00)

 

5.48

Day3

7,000,000.00

0.00

0.00

Day3

2,000,000.00

0.20

10.95

Day3

500,000.00

0.25

3.42

Day3

Total for Day 2 (Util=9,500,000.00)

 

14.37

 

You can also define the above fee structure as a percentage of the tranche amount, as shown below:

Tranche Utilization Amount

Util Fee (%)

< 70 %

0.00

> 70 % to < 90 %

0.20

> 90 %

0.25

 

The system uses the following amount tags for calculation of utilization and non-utilization fee. The formula to arrive at the amounts is also given:

Outstanding Amount

Outstanding Amount = ∑Drawdown amount-∑Drawdown Repayment

Non-Utilization amount

There are two types:

Tranche Current Limit

Tranche Current Limit = Initial Tranche Amount - ∑Tranche reduction amount till date

You can define Utilization and Non-Utilization fee rules in the ‘Fee Rule – Definition’ screen.

For more details on this screen refer the ‘Processing Charges and Fees’ chapter of this User Manual.

Note

The fee is calculated on the everyday balance and collected as per the schedule you de­fine in the ‘SCHEDULE’ tab of the ‘LS Tranche Contract Online’ screen.

5.8.21.2 Computing Facility Fee on Total Commitment Amount

You can calculate the Facility Fee on the total commitment amount considering the revolving/non revolving attributes of the tranche. You can define the Facility Fee component using the Basis Amount Tag ‘TRANSFER_AVL’ available in the Fee Class screen and Fee Definition sub screen for Tranche product maintenance.

‘TRANSFER_AVL’ balance represents the sum of the Available Balance and Outstanding Balance for a given value date.

Note

When you repay a drawdown for a Revolving tranche, the outstanding balance decreases and available balance increases; hence the ‘TRANSFER_AVL’ amount remains the same. For non-revolving tranche, when you repay a drawdown the outstanding balance decreas­es but the available balance remains the same; hence the TRANSFER_AVL amount de­creases.

For more details, refer the section ‘Specifying fee components for a borrower product’ in the chapter ‘Defining Products for Loan Syndication’ and section ‘Maintaining a Fee Class’ in the chapter ‘Processing Charges and Fees’.

5.8.22 Defining Tranche Fee Schedules

In the ‘Fee Components’ screen, you can define the start date and an end date for both utilization and non-utilization types of fee components. Click ‘Fee’ tab to access this screen.

The following details are displayed in this screen:

The above details defaults from the tranche product used to process the tranche. You can modify the following details in this screen:

Start Date and End Date

You can change the period for fee application provided the fee start date is not later than the maturity date of the tranche and the fee end date is not beyond the maturity date of the tranche.

Liquidation Mode

The liquidation mode specified in the ‘CONTRACT’ tab defaults here. Here, you can opt for a different mode for each component. The available options are:

For more details on ‘Events for Forward Processing’ screen refer the heading ‘Forward processing of events’ in this chapter.

Fee Basis

The fee basis defaults from the product level. However, you can change the default value anytime during the lifecycle of the contract. When you change the day basis, the system re-computes the schedule fee amount from the start date of the fee component. The amendment becomes applicable from the value date of the contract.

Note

Billing Notice Reqd

If the ‘Billing Notice Required’ option is selected for the tranche product (in the ‘Borrower Product – Fee Details’ screen), the same is applicable for the contract. Based on the number of days defined for billing notice generation for the product, system triggers the NOTC event for the fee component. However, you have the option to suppress the generation of billing notice for fee components. To suppress, choose the ‘NO’ option.

If the ‘Billing Notice Required’ option is not checked for the product, you cannot opt for the same at the contract level. Billing notice is not generated for such contracts.

Note

Oracle FLEXCUBE does not allow manual generation of billing notice.

Billing Notice Days

The billing notice days defaults from the product level. However, you can amend the default value.

For details on fee schedule amendment, refer the heading ‘Amending Fee Component Details’ in the ‘Processing Charges and Fees’ chapter of this User Manual.

After making the required changes, click ‘Ok’ button to save and exit the screen.

5.8.22.1 Specifying Back Valued Fee Schedules

You can specify a back valued start date for an existing Fee component, as part of Fee Amendment or Contract Amendment functionality. You can also define a new back valued Fee component, until the last liquidated schedule date of the same FEE component or beyond the last liquidated schedule date of other Fee components.

Note

5.8.22.2 Processing Utilization and Non-Utilization Fees

The utilization fee and non-utilization fee which is payable by the borrower on the total outstanding amount under a tranche is always be collected in arrears. Oracle FLEXCUBE calculates the daily outstanding and the daily non-utilized portion of the tranche for both revolving and non-revolving types. The outstanding portion and non-utilized portion are calculated only on days when there is a change either to the fee rate or to the basis amount. In all other cases, the last available value for the fee rate and basis amount are used for fee calculation.

The system does not calculate backdated utilization/non-utilization fee beyond the last liquidation/schedule date.

Example

Assume that you have defined a monthly fee schedule for utilization and non-utilization fee for a tranche contract where the payment falls on the last day of every month. If you process a backdated drawdown on 15th Jan 2005 with the value date on 15th Dec 2004, the system does not recalculate the utilization/non-utilization fee from 15th Dec 2004.

You cannot process back valued drawdowns beyond the last liquidation/ schedule date of the interest components of all the drawdowns under a tranche. Similarly, back valued drawdowns are not allowed beyond the last liquidation/schedule date of utilization /non-utilization fee components of the tranche.

Back value dated repayments/prepayments/drawdowns/value dated amendments for increasing the principal drawn down is based on the outstanding amount and non-utilization amount. However, the system does not allow back value dated amendments/participant ratio changes beyond the last schedule/liquidation date. Similarly, back valued amendments /back valued participant ratio changes/back value dated drawdowns are not allowed beyond the last schedule/liquidation date of the utilization/non-utilization fee components of the tranche.

5.8.22.3 Processing LC Fees

Oracle FLEXCUBE processes the following two types of fees for an LC type of drawdown:

The amount tags ‘STANDBY_LCOS’ and ‘COMMERCIAL_LCOS’ captures the outstanding LC balance for the two LC types, respectively. The system tracks the value date wise balances by taking into consideration all activities that alter the balance. This includes Initiation, Payments, and Value Dated Amendments, and so on.

For processing issuance fee, you need to first identify the participants who would be LC issuers. This is done at the tranche level. Each issuer is given a unique issuing bank number – ISSUER1, ISSUER2 and so on up to ISSUER10. Issuance fee is paid to the issuer of the LC. You can select the issuer at the drawdown level. The list maintained for the tranche defaults to the drawdown. You have to select an issuer from this list.

The basis amount tags ISSUER1_LCOS, ISSUER2_LCOS, to ISSUER10_LCOS associated with ISSUER1, ISSUER2 to ISSUER10, respectively, is used to track the outstanding amount of all the LC drawdowns for that issuer.

5.8.23 Viewing Tranche Tax Details

The tax details defaults from the facility contract if a tax rule is associated with the participant product linked to the facility product. You can view the tax details for the contract in the ‘Participant Tax Details’ screen. Click the ‘Tax’ tab to invoke the screen.

 

At the tranche level, tax is applicable only on the fee component. This screen displays the tax rule details associated with the tranche product. You have the option to waive the subsequent tax to be applied for a participant and tax rule combination.

The system passes the entries for tax based on the event you specify in the ‘Product Tax Linkage’ screen. Typically, tax on fee is calculated upon liquidation of the fee (event ‘FLIQ’ will be associated with the rule) while tax on interest is computed on interest liquidation (event ‘LIQD).

For more information on the Tax sub-system of Oracle FLEXCUBE, refer the Tax User Manual.

5.8.24 Defining Overwrite Settlement Instructions for the Tranche

You can overwrite the settlement instructions maintained for a contract with internal GLs by specifying the Overwrite instruction in the ‘Overwrite Settlement Instruction Details’ screen. This screen can also be used if the payment is to be routed through internal GLs instead of the customer accounts. For example, Manual Rollover.

Click ‘Overwrite Default SI’in the ‘LB Tranche Contract Online’ screen to invoke the following:

 

Specify the required details as given below:

Component

This screen displays the all the components displayed in the Settlement Message Details screen. The tax components related to the participant contracts are also displayed here.

Internal GL

Specify the Internal GL accounts into which you want to post the liquidation entries for the components.

Overwrite default settlement instruction

Check the ‘Overwrite default settlement instruction’ box to confirm that the liquidation entries should be posted into the Internal GL account. System posts the entries to the Internal GLs only if you check this box. Otherwise, system posts the entries as per the settlement instructions specified for the component of the contract.

Note

5.8.24.1 Authorizing the overrides for tranche

You need to perform dual authorization, if you have selected the Overwrite SI option for any of the following events:

You are not allowed to authorize these events without authorizing the override details for Overwrite SI. When you try to authorize a contract with overrides, following error message gets displayed.

All Overrides requiring confirmation have not been CONFIRMED – Confirm them.

You need to authorize the overrides manually in the ‘Credit Authorizations Outstanding’ screen. You can invoke the ‘Dual Authorization’ screen by typing ‘LBDOVDET’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

This screen displays the following details related to the LB module:

If you double-click the module field in this screen, the ‘Details of the Overrides requiring dual authorization’ screen is displayed.

You can view the following details in this screen:

You can change the Override Status to ‘Authorized’ and click ‘Confirm’ to authorize single record or ‘Authorize All’ to authorize all the records pending for authorization.

After authorizing all the related overrides, you can proceed with the authorization of the event.

5.8.25 Viewing Settlement Instructions for the Tranche

To view the settlement instructions for the tranche borrowers, click the ‘Settlement Instructions’ button from ‘Borrowers Details’ screen.

 

The system obtains the settlement details based on the SSI Mnemonic for each borrower.

If the ‘Chinese Characters in Payment’ box is selected in the ‘Loan syndication- Branch Parameters’ screen, then only you can enter the Chinese characters in the field 57, 59, and 70 for foreign currency and local currency settlement instructions / accounts and there are no validations in the system. You need to operationally control it.

You are allowed to enter the information in Chinese or English or a combination of both in this field. If it is a combination, then the system considers it as Chinese and allow up to 35 characters.

Note

This is applicable only for ASPAC region.

For more details about the ‘Settlement Message Details’ screen, refer the Settlements User Manual.

5.8.26 Defining Repayment Schedules for the Tranche

You can capture the schedule date and schedule amount for drawdown repayments at tranche level in the ‘Tranche Repayment Schedules’ section. Click the ‘Tranche Repayment Schedules’ tab to access this screen.

 

The tranche repayment schedule screen displays the all the schedules from the value date to the maturity date of the tranche. You can specify the following in this screen:

Start Date

Specify the start date for the tranche repayment schedule.

End Date

Specify the end date for the tranche repayment schedule.

Schedules

Specify the number of schedules applicable for each tranche repayment.

Frequency

Select the frequency for the tranche repayment schedule from the adjoining drop-down list. You can select one of the following values:

Unit

Specify the unit for the tranche prepayment schedule.

Amount prepayment Rule

Select the amount prepayment rule applicable for the tranche repayment from the adjoining drop-down list. You can select one of the following values:

Date

You have to specify the repayment date in ‘DD-MMM-YYYY’ format. The schedule date should not be later than the tranche maturity date.

Schedule Amount

Specify the repayment amount for each schedule. The sum of the schedule amount should be equal to the tranche amount.

Tranche Repayment Rule

Select the repayment rule for each schedule date. The possible options are LIFO, FIFO, and PRO-RATA.

Status

Indicates the status of the schedule. All the past schedules show the status as ‘Processed’ and all the future schedules show the status as ‘Unprocessed’. You can not modify ‘Processed’ schedules.

Drawdown Ref No.

Select the drawdown to be liquidated/partially rolled over, from the list of drawdowns maturing on the same date as the tranche repayment schedule date.

Note

Against a tranche schedule, you can select only those drawdowns maturing on the given tranche repayment schedule.

Allocation Amount

Specify the liquidation amount against each drawdown. The allocation amount for each drawdown can be greater than or equal to zero.

Sum

System displays a sum of all allocation amount provided.

Note

Redefinition of tranche repayment schedule happens as part of end of day process after the liquidation. Based on the repayment rule specified during the actual liquidation across drawdowns, the future schedules get adjusted against the respective schedule date.

You can invoke the borrower and the participant Free Format Message screens using the ‘BorFFT’ and ‘PartFFT’ tabs respectively.

You can amend the details of current or future dated repayment schedule amounts as well as their allocations, if required.

5.8.26.1 Capturing Tranche Repayment Rule for Unscheduled Repayments

You can capture the rules for the unscheduled drawdowns in the ‘Unscheduled Repayment Details’ screen. To invoke this screen, click the ‘Unscheduled Repayments’ button in ‘Tranche Repayment Schedules’ tab. This button is enabled only for non-revolving tranches.

 

In this screen, the following details of the drawdowns with maturity dates not matching with tranche repayment schedule dates get displayed:

You can also capture the following details related to the drawdowns:

Repayment Amount

Specify the liquidation amount for the drawdown.

Note

You can not specify an amount greater than the outstanding amount for that drawdown.

Tranche Repayment Rule

Select the repayment rule for each drawdown schedule date. The possible options are LIFO, FIFO, and PRO-RATA. By default, tranche repayment captured will be displayed against each drawdown.

You can invoke the borrower and the participant Free Format Message screens using the ‘BorFFT’ and ‘PartFFT’ buttons respectively.

5.8.26.2 Viewing Repayment History

Click ‘Schedule History’ button in the Tranche Repayment Schedule tab to invoke the ‘Repayment History’ screen. In this screen you can view the history of the past tranche repayment schedules along with the actual cash flow of the drawdowns under that tranche, for a value date.

Note

5.8.26.3 Tranche Repayment Schedule for Non-lead (Wrapper) Tranches

Tranche repayment schedules for non-lead (wrapper) products are maintained based on the global amount maintained at the tranche level. If the ‘Apply Re-pmnt sch validation’ box is checked in the ‘Additional Preferences for LS’ screen, then the sum of all repayment schedule amounts of the tranche should be equal to the global amount maintained for the tranche.

For more details on the ‘Apply Re-pmnt sch validation’ box, refer section ‘Specifying Additional Preferences for Loan Syndication’ in chapter ‘Defining Products for Loan Syndication’ in the Loan Syndication User Manual.

Note

Note the following in case of non-lead (wrapper) products:

5.8.27 Specifying the Tranche MIS Details

You can specify the MIS (Management Information System) details for the tranche in the ‘ MIS ’ screen. To invoke this screen, click the ‘MIS’ tab.

 

For details on the ‘Transaction MIS Details’ screen, refer the MIS User Manual.

5.8.28 Specifying Parties for the Tranche

You can also specify different types of entities or parties that would be applicable for the borrower tranche as well as the applicable parties belonging to the selected type, in the ‘Party Details’ screen. The party types associated with the tranche product defaults to the tranche; you can change them and specify the required types at the tranche level.

Click ‘Party Type’ tab to invoke the ‘Party Details’ screen.

For more details on the above screen, refer the heading ‘Specifying parties for the facility’ in this chapter.

5.8.29 Specifying UDF Values for the Tranche

The User Defined Fields (UDFs) defined for the tranche product are applied for the contracts processed under it. You can view the UDFs, if applicable, in the ‘User Defined Fields’ screen. Click the ‘UDF’ tab to invoke this screen.

Example

Variance Rate Cap ‘RATE- VARIANCE’ is a UDF defined for tranche products. This represents the maximum rate change (both upper and lower limit) for contracts processed under the tranche product.

Note

This UDF is not maintained for drawdown products.

For more details on the above screen, refer the UDF (User Defined Fields) User Manual.

The UDF ‘PAYOFF-FEE’ attached to tranche products is used to determine the flat fee amount.

5.8.29.1 Authorizing Overrides

You need to perform dual authorization, if the UDF ‘RATE-VARIANCE’ is maintained as a non-zero value for tranche or drawdown linked to the tranche contract for any of the following operations:

During tranche contract amendment, if the above UDF value is modified (zero to non-zero, non-zero to zero, or original value is changed) an override is displayed for dual authorization.

During drawdown contract amendment, no override is displayed for dual authorization as the variance rate cap maintenance is done only at tranche level.

If any of the aforementioned operations are performed, the system displays the following override message:

Variance rate cap <value> is maintained for this contract, dual authorization required.

If the override is selected as ’Yes’, the contract is saved for further processing. If the override is selected as ‘No’, the save operation fails.

Once the contract is saved successfully, the contract reference number with override details appear in the dual authorization screen for the first authorization.

For more details on the ‘Dual Authorization’ screen, refer the section ‘Authorizing the overrides for tranche’ in this chapter of this User Manual.

Once the contract is authorized in the dual authorization screen, final authorization is done.

Note

If the UDF ‘RATE-VARIANCE’ is not maintained or maintained as zero, dual authorization is not required.

5.8.30 Modifying Tranche Advice Details

The advices associated with the product default to the contract. You can view the advice details in the ‘Advices’ screen. Click the ’Advice’ tab to invoke this screen.

 

The following details are displayed in this screen:

For a contract, you can change the following advice details only:

Suppress All

Select this check box to indicate that the system can suppress all the messages.

Suppress

You can choose between ‘Yes’ and ‘No’. Risk E-mail events can be suppressed.

Priority

You can change the priority to any one of the following

After capturing the required details, you have to save the contract and have it authorized by your supervisor.

After you save the tranche, you can view the following details of the contract:

These details are discussed below.

5.8.31 Viewing Tranche Diary Events

You can view the diary events defined for the contract in the ‘Diary Contracts – Summary’ screen (OLSDIAEV). To invoke this screen, click ‘Diary’ tab.

 

This screen displays the various dairy events fired for the main facility contract as will as for the drawdowns processed under it. Dairy events include events like Contract Amendment (CAMT), Interest Rate Fixing (IRFG), Exchange Rate Fixing (EXFG), and so on.

For more details on the ‘Dairy Events Maintenance’ screen, refer the heading ‘Maintaining diary events’ in the ‘Reference Information for Loan Syndication’ chapter of this User Manual.

5.8.32 Viewing Netting Cash Flow Summary

You can view the netting cash flow details for the tranche in the ‘Loans Syndication Netting Cash Flow Summary’ screen. Click the ‘Netting’ tab to invoke this screen.

 

The following details are displayed in this screen:

If netting has not occurred or is not applicable for the contract, the system will display the following message when you click the ‘Netting’ tab.

There is no record selected for netting

For more details on the above screen, refer the heading titled ‘Netting Cash Flows for a tranche’ in this chapter.

5.8.33 Viewing Messages for the Tranche

You can view messages generated for the contract using ‘Message Preview’ screenTo view the messages click Events > Messages>Message Details button. The ‘Message Preview’ is displayed.

Note

This button is enabled only if the latest event, with a payment message associated with it, is unauthorized.

Select the option:

Click the ‘Message Details’ button to view the messages generated, if any.

 

If messages are not available, the following message will be displayed:

No messages for preview

Note

For back value dated contracts, the system displays the ‘Application Date’ as the Value Date for payment advices for both borrowers and participants. The Application date is dis­played in field 32A of MT202 and MT103 SWIFT messages.

5.8.34 Viewing tranche participant summary details

The ‘Participant Contract Summary’ screen will give you a summary of the participant facility/tranche contracts created for the borrower facility/tranche contracts. To view the details, click ‘Participant Summary’ button.

 

The following details are displayed in this screen:

Additionally, you can also query the contracts using the fields available in the screen, individually or in combination with one another.

5.8.35 Viewing Events for the Tranche

You can view the events triggered during the tranche life cycle in the ‘Event Log Details’ screen. To invoke this screen, click ‘Events’. The events defined for the tranche product are triggered for the contract

 

For more details on this screen, refer the heading ‘Viewing Events for the facility’ in this chapter.

After you save and authorize the tranche contract, you can process drawdowns under the tranche.

5.8.36 Viewing Floor and Ceiling Details

You can view floor and ceiling details for base rate, margin and all-in-rate in the ‘Floor and Ceiling’ screen. Click on ‘Floor and Ceiling’ to access this screen.

 

The following details are displayed in this screen:

However, you can amend this screen before first authorization.

For more details on capturing the floor and ceiling details, refer the heading ‘Maintaining Floor and Ceiling Details’ in this chapter.

5.8.37 Capturing Assignments for the Tranche

You can capture the assignment validations for a tranche in the ‘Assignment Validation’ screen. Click ’Assignment’ tab to access this screen.

 

You can specify the following details in this screen:

5.8.37.1 Viewing Contract Detail

Product Code

The system displays the product code.

Contract Ref No

The system displays the contract reference number.

Customer

The system displays the customer name.

Facility Name

The system displays the facility name.

5.8.37.2 Specifying Assignment Validations

Agent Consent Required

Select this check box if agent consent is required.

Affiliate Letters Accepted

Select this check box if affiliate letters are accepted.

Transfer Amount Validations

Apply Transfer Amt Validations

Select this check box if transfer amount validation is required.

Min Transfer Amt

Specify the minimum transfer amount in tranche currency. During the participant transfer for the tranche, the system will check if the transfer amount is greater than the minimum transfer amount captured. If the transfer amount is less than the minimum transfer amount, then the system will display the following override message:

Transfer amount is less than the minimum transfer amount.

Note

If the transfer amount is zero or not captured, then the system will not check for any vali­dations.

Min Amt after Transfer

Specify the minimum amount after transfer in tranche currency. The system will validate if the transfer balance after assignment for the assignment value date is greater than or equal to the Minimum amount after transfer. If the transfer balance is less than the minimum amount after transfer, then the system displays the following override message.

Transfer balance is less than the minimum retention amount.

If the transfer amount is zero, then the system does not check for any validations.

Transfer Amt in Multiples of

Specify the multiple of transfer amount in the tranche currency. During the participant transfer for the tranche, the system checks if the transfer amount is in the multiples of amount specified. If the transfer amount is not in the multiples of the amount captured, then the system displays the following override message:

Transfer amount is not in Multiple of <Multiple amount for Transfer>

Note

If the transfer amount is zero or not captured, then the system does not check for any val­idations.

Specifying Waiver Options

The system waives the transfer amount validations based on the transferor or transferee type.

For Lender

Select this check box if the system waives the transfer amount for a Lender type.

For Affiliates

Select this check box if the system waives the transfer amount for an Affiliate type.

With Agent Consent

Select this check box if the system waives the transfer amount for an Agent Consent.

Note

This check box is enabled only if you have checked the ‘Agent Consent Required’ box.

With Borrower Consent

Select this check box if the system waives the transfer amount for a Borrower Consent.

During Complete Transfer

Select this check box to waive the complete transfer amount.

Specifying Consent Validations

Validate Borrower Consent

Select this check box to validate the borrower consent.

Required For

Selecting ‘Validate Borrower Consent’ box, the ‘Required For’ options will be enabled.

Existing Investors

Select this check box to validate the borrower consent for existing investors.

New Investors

Select this check box to validate the borrower consent for new investors.

Existing Investors of Affiliate Type

Select this check box to validate the borrower consent for existing investors of Affiliate type.

Note

This check box is enabled only if you have checked ‘Affiliate Letters Accepted’ box.

All Assignments

Select this check box to validate the borrower consent for all the above parameters.

Note

If ‘Agent Consent Required’ box is checked, then the system will display the following override message for all assignments:

Agent Consent is required for Participant <Investor Number>

Validate Issuing Bank Consent

Select this check box to validate the issuing bank consent.

Note

All the participants defined in the ‘LC Issuer’ sub screen of ‘Tranche Online’ are consid­ered as Issuing Bank.

Required For

Selecting ‘Validate Issuing Bank Consent’ box, the ‘Required For’ options will be enabled.

Existing Investors

Select this check box to validate the issuing bank consent for existing investors.

New Investors

Select this check box to validate the issuing bank consent for new investors.

Existing Investors of Affiliate Type

Select this check box to validate the issuing bank consent for existing investors of Affiliate type.

Note

This check box is enabled only if you have checked ‘Affiliate Letters Accepted’ box.

All Assignments

Select this check box to validate the issuing bank consent for all the above parameters.

Note

If ‘Agent Consent Required’ box is checked, then the system will display the following override message for all assignments:

Agent Consent is required for Participant <Investor Number>

Validate Swing Line Bank Consent

Select this check box to validate the swing line bank consent.

Note

All the participants defined in the ‘Part Limit’ sub screen of ‘Tranche Online’ with Limit type as ‘Swing Line’ are considered as Swing Line bank.

Required For

Checking ‘Validate Swing Line Bank Consent’ box, the ‘Required For’ options will be enabled.

Existing Investors

Select this check box to validate the issuing swing line bank consent for existing investors.

New Investors

Select this check box to validate the issuing swing line bank consent for new investors.

Existing Investors of Affiliate Type

Select this check box to validate the issuing swing line bank consent for existing investors of Affiliate type.

Note

This check box is enabled only if you have checked ‘Affiliate Letters Accepted’ box.

All Assignments

Select this check box to validate the swing line bank consent for all the above parameters.

Note

If ‘Agent Consent Required’ box is checked, then the system will display the following override message for all assignments:

Agent Consent is required for Participant <Investor Number>

Tranches with Min Trade Amt

Specify the tranches with minimum trade amount.

Tranches to be traded together

Specify the tranches that needs to be traded together.

Remarks

Specify the remarks, if any.

Issuing Bank

Select the issuing bank for new tranche booking or tranche amendment, from the adjoining option list. This list displays all allowed active authorized banks that are allowed at the tranche product level.

Swingline Lenders

Select the swingline lender for new tranche booking or tranche amendment, from the adjoining option list. This list displays all allowed active authorized customers that are allowed at the tranche product level.

Simultaneous Transfer Tranches

Select the simultaneous transfer tranches from the adjoining option list. This list displays all active authorized tranches.

Tranches Covered Under Lender Status

Select the tranches covered under the lender status from the adjoining option list. this list displays all active authorized tranches.

Issuing Bank Sublimit

Specify the issuing bank sublimit amount. For lead tranches, this amount should not be greater than the tranche amount. For non-lead tranches, this amount should not be greater than the tranche global amount.

Swingline Sublimit

Specify the swingline sublimit amount.

Special Cases

Specify the applicability of special cases for the tranche.

Section Number

Specify the section number.

Default Lender Language

Select the applicability of the default lender language from the adjoining drop-down list. This list displays the following values:

Borrower Consent Days

Specify the borrower consent days.

Assignment Fee

System displays the latest assignment fee for the facility/product in the tranche currency if it is maintained at the facility/deal level.

Requires Simultaneous Transfer of Deal

Select this check box to indicate that simultaneous transfer of the deal is required for the tranche.

Notify Borrower of Assignment

Select this check box to indicate that the borrower should be notified about the fee assignment,

5.8.38 Processing of Banker’s Acceptance Contracts

The following processing takes place in ‘LS Tranche Contract Online’ screen for BA contracts.

5.9 Viewing Borrower Tranche Summary

You can view the Borrower Tranche summary in the ‘Borrower Tranche Summary’ screen. You can invoke the ‘Borrower Tranche Summary’ screen by typing ‘LBSTRONL’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

The system allows you to perform a case-independent query (upper, lower, or mixed case) using the following fields:

Note

You can perform a case independent search only if the parameter, ‘CASE_SENSITIVITY’ in cstb_param, is set to ‘Y’.

5.10 Maintaining Tranche Collateral Details

You can maintain the collateral details for a tranche in the ‘LB Tranche Collateral Online’ screen. Click ‘Collaterals’ tab to access this screen.

 

For more information on maintaining collateral details for a tranche, refer the section ‘Maintaining Tranche Collateral Details’ in the chapter titled ‘Maintaining Collateral Details’ in this User Manual.

5.11 Maintaining Tranche Collateral Account Details

You can maintain the tranche account details for collateral in the ‘Collateral Account’ screen. Click ‘Collateral Account’ tab to access this screen.

 

For more information on maintaining tranche account details for collateral, refer the section ‘Maintaining Tranche Collateral Account Details’ in the chapter titled ‘Maintaining Collateral Details’ in this User Manual.

5.12 Maintaining Tranche Collateral Entity Details

You can maintain the tranche collateral entity details in the ‘Collateral Entity Input’ screen. Click ‘Collateral Entity’ to access this screen.

 

For more information on maintaining tranche entity details for collateral, refer the section ‘Maintaining Tranche Collateral Entity Details’ in the chapter titled ‘Maintaining Collateral Details’ in this User Manual.

5.13 Maintaining Collateral Percentage Details

You can maintain the collateral percentage details for the participants in the ‘Participant Collateral Detail’ screen. Click on ‘Collateral Participant’ to access this screen.

 

You can access this screen only during tranche booking.

For more information on maintaining collateral percentage details, refer the section ‘Maintaining Collateral Percentage Details’ in the chapter titled ‘Maintaining Collateral Details’ in this User Manual.

5.14 Maintaining Escrow Account Details

You can link escrow accounts to a contract using the ‘Escrow Account Maintenance’ screen. Click the ‘Escrow’ in the ‘LB Tranche Contract Online’ screen to access this screen.

 

You can specify the following details in this screen:

Account Number

Select the account number of the customer from the adjoining option list.

Account Desc

System displays the description of the account number.

Escrow Type

System displays the Escrow type.

Escrow Balance in LCY

System displays the available escrow balance in local currency.

Note

You can select the escrow account from the option list, which lists all customer and GL accounts where Escrow Type UDF has been specified. Account Number is assumed to be unique across branches. System validates if the escrow account is a customer account (i.e. Escrow Type UDF =’ECS3’). Such accounts can only be linked to a single loan con­tract. However, if the escrow account is a GL account, then it can be linked to multiple loan contracts.

You can delink a previously linked escrow account using the contract amendment option. When you click Delete button, system validates that there is no balance in the account for this contract. When you perform contract liquidation or a reversal, system validates that there are no balances in linked escrow accounts. Rollover can be processed only if the balance in all the linked escrow accounts for the contract is zero. Thus during rollover, bal­ances in the escrow account will not be automatically transferred to the new contract. If escrow balances exist for the contract, then during rollover instruction input, system alerts the user. Rollover instructions can be captured even if escrow balances exist, however before rollover is processed you must ensure that all such balances are nullified. Rollover will fail for a contract if the escrow balances have not been nullified. If a contract is marked for auto rollover, and if there is pending balance in any of the linked escrow accounts, then the rollover of the contract will fail. Escrow maintenances are not be copied to the rolled-over contracts from the parent contract. However you can amend the rolled-over contract and capture the Escrow accounts to be linked.

When you launch the sub-screen from the contract main screen, system will fetch the EOD balance for the Contract Reference Number and Escrow Account combination for each linked Escrow Account. All entries posted during the day up to the time of the query are considered. Thus the balance displayed in ‘Escrow Balance’ field for each Escrow Account will be the current balance in real time for the contract.

Impounding escrow components for tax and insurance are collected as per the payment schedule using the manual payment screen and liquidated into the escrow account mapped at the product level. Such Escrow accounts must be separately linked to the con­tract using ‘Escrow Account Maintenance’ screen so that the balance of such escrow ac­counts are displayed at contract level along with other Escrow balances.

Back date adjustment entries are considered only after linking escrow account at contract.

Example

01-Jan-2005: Adjustment entries are posted for contract (No Escrow Accounts)

02-Jan-2005: Attached Escrow accounts for which adjustment entries are posted on 01-Jan-2005, these entries are not considered.

01-Jan-2005: Adjustment entries are posted with value date 01-Jan-2005 then this entries are considered.

5.15 Maintaining Agent CIF and Mnemonic Details

You can maintain the Agent CIF and Mnemonic details using the ‘Origination Agent CIF and Mnemonic Maintenance’ screen. Click the ‘Agent CIF’ in the ‘LB Tranche Contract Online’ screen to access this screen.

 

The following contract details are displayed from the contract screen here:

You can specify the following details:

Agent

Select the agent from the list of valid customer numbers provided. The name of the selected agent number gets displayed.

The currency belonged to the selected agent gets displayed and you can map the mnemonic against it.

SSI Mnemonic

Specify the mnemonic for the selected currency from the list of valid mnemonic provided.

Agent CIF or Mnemonic maintenance done as part of tranche amendment have no effect in any of the existing origination contract and is applicable only for the new origination booking through STP. Maintaining the appropriate Agent CIF depending on whether the tranche is a Lead or Non-Lead is completely have no validations.

You can add new currency and mnemonic for that currency and applicable only for new originations booking through STP. While copying the tranche contract, system does not copy the Agent CIF details from the previous contract. Maintaining the appropriate Agent CIF depending on whether the tranche is a Lead or Non-Lead is completely operationally controlled and the system does not perform any validations here.

If the Agency branch is different from the Self participant branch and if Agent CIF/Currency/Mnemonic maintenance is not available then the system will continue to book the origination contract without Agent CIF and mnemonic will be picked up by normal settlement pickup logic based on the settlement maintenance for the customer and the same can be amended at a later stage by doing the origination contract amendment.

5.16 ELCM Block Details

You can use the ‘Contract Block Details’ screen for viewing blocked funds of facility, liability, collateral, and collateral pool.

Click the ‘ELCM Block Details’ in the ‘LB Tranche Contract Online’ screen to access this screen.

Or

You can invoke the ‘ELCM Block Details’ screen by typing ‘OLDBLKIN’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button

 

Contract Reference Number

The contract reference number attached to the block is displayed.

Block Reference Number

Indicates the unique block number with the combination of User Ref Number, Participant, and Event Sequence Number. This block number is assigned for every block that has been created.

Event Sequence Number

The system defaults the corresponding event sequence number.

Even Code

Select the block event code that you want to associate with the contract.

Participant

Select the participant of the contract.

Amount

Specify the amount to be blocked

5.17 Cancelling Tranche

You can cancel a tranche through the ‘Tranche Cancellation’ screen.

You can invoke the ‘Tranche Cancellation’ screen by typing ‘LBDCANCL’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

The cancellation basis is defined at the tranche level. You can capture the ‘Cancellation Rule’ in the ‘SCHEDULE’ tab of the ‘LB Tranche Contract Online screen’. The valid rules are:

For more details refer the section titled ‘Specifying processing rules for the tranche’ in this chapter.

Note

To do a cancellation, select the tranche that needs to be cancelled and select New from the menu. Specify the following in the ‘Cancellation Details’ section of the screen:

Value Date

Specify the value date when the cancellation should be processed. The value date can be equal to the system date or a date in the past. However, if it is past dated, it should not be earlier than the latest drawdown’s value date or the last fee liquidation date of utilization/non-utilization fee.

Note

Oracle FLEXCUBE does not allow future dated cancellations.

Amount In

You have to capture the tranche amount to be cancelled. As mentioned, you can cancel a tranche fully or partially. You can capture the amount either as a percentage or an absolute. If you enter the percentage, system computes the equivalent amount and vice versa.

5.17.1 Processing a Cancellation

After capturing the required details in the ‘Tranche Cancellation’ screen, you have to save the same. The system displays a confirmation message upon successful save and also updates the ‘Cancellation Event Sequence No’ accordingly. This display the total cancellations processed for a contract. The event ‘CANC’ also be triggered when you save the cancellation details.

On cancellation of a tranche, the system performs the following activities online:

5.17.2 Amortize schedule type products for Tranche Contracts

If Interest/Fee Distribution is Lender of Record, then amortize schedule type of borrower products are allowed under DD Products screen at Tranche level.

Interest/Fee Distribution flag in the ‘LS Tranche Contract Online’ screen can be changed from Lender of Actuals to Lender of Records and vice versa during contract booking with the below override message

Int / Fee Distribution value is changed from Lender of Actuals(LOA) to Lender of Records(LOR).

Click OK for the value to be changed as Lender of Record (LOR) and the message gets populated to ‘LS Dual Authorization screen’

Details of Overrides requiring dual authorization

After authorizing this override message, the contract is allowed to authorize.

Or else, you can cancel the override message and the value of the flag remains as Lender of Actuals (LOA)Amortization is not supported for the following functionalities:

5.18 Amending Tranche Margin Details

At the tranche level, you would have maintained the Margin Slab/Tier structure for margin types of ‘Tranche’ basis.

For more details on this, refer the heading titled ‘Maintaining Margin Slab/Tier structure’ in this chapter.

After you authorize the tranche, you may want to amend the margin details. In addition, if you do not maintain the margin details when capturing the tranche, you can specify the same after the tranche is saved and authorized. You can use the ‘Margin Maintenance’ screen available in the Application Browser for these activities. Note that you cannot amend margin rates for borrowers and participants before the participant transfer value date if a transfer has been initiated with a future value date.

You can invoke the ‘Margin Maintenance’ screen by typing ‘FCDRCMNT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

To maintain/amend the details, select New from the menu. Then, select the following in this screen:

Contract Ref No

You have to select the tranche for which margin details have to be maintained or amended, as the case may be. The option list displays all the authorized tranches processed in the system. When you select the tranche, system displays the following:

Customer No

Select the customer for whom you want to maintain the margin details. The option list displays the names of the borrowers associated with the selected contract and also the ‘ALL’ option. If you want to apply the margin details to all the borrowers, select the ‘ALL’ option.

Component

Select the margin component for which you want to capture the details. All margin components associated with the selected contract will be available in the option list. When you select the component, system will default the ‘Component Type’, whether ‘Slab’ or ‘Tier’. This is based on your maintenance in the ‘Margin – Definition’ screen. You cannot change this parameter.

Amount Type

You can define the Slab/Tier structure either in terms of amount or percentage of tranche utilization. Select the appropriate option.

For details on the other fields required to capture a Slab/Tier structure, refer the heading titled ‘Maintaining Margin Slab/Tier structure’ in this chapter.

Note

If the Margin rate is changed manually and the UDF value for ‘RATE-VARIANCE’ is main­tained as a non-zero value for Borrower tranche, dual authorization is required to save the operation.

For more details, refer the section ‘Authorizing Overrides’ in this chapter of this User Manual.

5.18.1 Viewing Margin Maintenance Summary

You can view the Margin Maintenance summary in the ‘Margin Maintenance Summary’ screen. You can invoke the ‘Margin Maintenance Summary’ screen by typing ‘FCSRCMNT’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

The system allows you to perform a case-independent query (upper, lower, or mixed case) using the following fields:

Note

You can perform a case independent search only if the parameter, ‘CASE_SENSITIVITY’ in cstb_param, is set to ‘Y’.

5.18.2 Spreading Margin Rate Revisions

Oracle FLEXCUBE allows you to revise the margin rates to active drawdowns and the liquidated contracts also under a Tranche.

When a rate revision happens for a Tranche, MRFX event get fired across all drawdowns that are either in active or liquidated status. Payable and Receivable details get updated for the schedules which are falling after the effective date of the Margin Rate revision along with the settlement of difference in the settled and revised interest amounts. Note that the margin maintained for individual participants is also considered while re-computing interest due for the participants. If you amend the margin rates with effective date beyond the paid drawdown schedule, the system generates pay-receive (based on the margin maintained for the individual participants) for any change in the interest due, and this interest is liquidated separately.

Backdated margin rate revision gets applied only for the drawdowns under the tranche where the Interest/Fee Distribution type is defined as Lender of Actual.

5.19 Maintaining Floor and Ceiling Details

You can capture floor and ceiling details for base rate, margin and all-in rate. The floor and ceiling values can be maintained separately for each interest components associated with various Drawdown products mapped to the tranche for each drawdown currency. For Floor, the base rate should be more than the specified rate, and for Ceiling, the base rate should be less than the specified rate.

You can invoke the ‘Floor and Ceiling Maintenance’ screen by typing ‘LBDFLRCL’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

 

You can specify the following details in this screen:

Contract Ref No

The system displays contract reference number.

Product Code

The system displays the product code.

Customer

The system displays the customer name.

Facility Name

The system displays the facility name.

5.19.0.1 Specifying Currency Details

CCY

Specify the currency details.

Currency Name

The system displays the name of the currency selected.

5.19.0.2 Specifying Effective Date

Effective Date

Specify the effective date for each currency you select.

5.19.0.3 Specifying Base/All-in Rate Floor and Ceiling

DD Product

The system displays the DD product details.

Interest Component

Specify the interest component details.

5.19.0.4 Specifying Base Rate for Floor and Ceiling

Floor

Specify the floor base rate.

Ceiling

Specify the ceiling base rate.

Margin Adj Comp

Select the margin adjustment component from the adjoining option list. You can select any drawdown basis margin component associated with the drawdown interest component.

You can maintain only one adjustment margin component for each tranche floor and ceiling maintenance for a combination of Tranche ref no, currency, effective date, drawdown product and Interest component. System validates whether the base rate of the associated drawdown is within the limit of floor and ceiling maintained for the base rate, otherwise the system adjusts the rate to the margin adjustment component accordingly.

Note

5.19.0.5 Specifying All-In Rate for Floor and Ceiling

Floor

Specify the floor all-in rate.

Ceiling

Specify the ceiling all-in rate.

5.19.0.6 Specifying Margin Floor and Ceiling

Margin Component

Specify the margin component.

Basis Amount Tag

The system displays the basis amount tag.

Margin Floor

Specify the floor margin.

Margin Ceiling

Specify the ceiling margin.

5.19.1 Validating Base Rate Floor and Ceiling at Drawdown Level

Following validations are done for base rate floor and ceiling at drawdown level:

If the base rate is less than the floor defined at the tranche, then the system displays the following override message:

Rate is less than the Floor defined at Tranche. Do you want to over-write the rate with the Floor value?

Clicking on the ‘OK’ button, the system defaults the base rate with the floor value defined at the tranche.

If you cancel the override message, then you need to specify the base rate greater than the floor value to exit from the screen.

If the base rate is greater than the ceiling defined at the tranche, then the system displays the following override message:

Rate is greater than the Ceiling defined at Tranche. Do you want to over-write the rate with the Ceiling value?

Clicking the ‘OK’ button, the system defaults the base rate with the ceiling value defined at the tranche.

If you cancel the message, then you need to specify the base rate lesser than the ceiling value to exit from the screen.

Example

Assume the following values for an interest component maintained for the Tranche:

Floor value of Base rate: 6%

Ceiling value of Base rate: 8%

During Drawdown Rate fixing,

If the base rate is fixed to 2%, since the rate is less than the Floor defined at the Tranche, system will display the following override message

“Rate is lesser than the Floor value, 6% defined at Tranche. Do you want to over-write the rate with the Floor value?”

Clicking on the ‘OK’ button, the system defaults the base rate as 6%. If you cancel the message, then you should input a base rate greater than Floor rate maintained in the Tranche.

If the base rate is fixed to 10%, since the rate is greater than the Ceiling defined at the Tranche, system displays the following override message:

“Rate is greater than the Ceiling value, 8% defined at Tranche. Do you want to over-write the rate with the Ceiling value?”

Clicking on the ‘OK’ button, the system defaults the base rate as 8%. If you cancel the message, then you should input a base rate lesser than Ceiling rate maintained in the Tranche.

5.19.2 Propagating Base Rate Floor and Ceiling for an Effective Date

Oracle FLEXCUBE allows you to change the application date for floor and ceiling base rate. In such cases, if the base rate for the drawdown is not within the floor and ceiling, then the system will propogate the floor or ceiling rate to the active and future dated drawdowns under the tranche which have fixed interest type.

If ‘Floor/Ceiling restricted to base rate’ is selected then the Floor and Ceiling propagation is applied to the margin adjustment component. Propagation happens online whenever interest rate is fixed or changed. This can happen while booking a new drawdown or while processing a Rollover/Reprice instruction or during IRAM

If the Base rate for the active drawdown is less than the new floor value defined for the Base rate at the Tranche level, then new Floor value is propagated as the Base rate for the drawdown. Interest Rate Amendment (IRAM) event is triggered on the drawdown with application date as value date for the Base rate change.

If the Base rate for the active drawdown is greater than the new Ceiling value defined for the Base rate at the Tranche level, then the new Ceiling value is propagated as the Base rate for the Drawdown. Interest Rate Amendment (IRAM) is triggered on the drawdown with application date as value date for the Base rate change.

If the new base rate Floor/Ceiling is greater than or less than the base rate of the uninitiated drawdown, then the base rate for the uninitiated drawdown is updated with the new rate based on the floor/ceiling. Interest Rate Amendment (IRAM) event is registered on the uninitiated drawdown for this change.

Note

Propagation happens for base rate only at the time of batch.

Propagation process happens during batch if new floor and ceiling is maintained or existing maintenance is amended at the tranche level, with effective date as application date, provided no online propagation has happened after the Floor/ceiling maintenance.

5.19.3 Validating Margin Rate Floor and Ceiling at Drawdown Level

Oracle FLEXCUBE allows you to capture the Margin Rate Floor and Ceiling rates at the Tranche level for each of the margin components that are defined for the tranche and currency combination.

Following validations are done for margin rate floor and ceiling at drawdown level:

If the margin rate is less than the floor defined at the tranche, then the system displays the following override message:

Rate is less than the Floor defined at Tranche. Do you want to over-write the rate with the Floor value?

Clicking on the ‘OK’ button, the system defaults the floor value defined at the tranche.

If you cancel the override message, then you need to specify the margin rate greater than the floor value to exit from the screen.

If the margin rate is greater than the ceiling defined at the tranche, then the system displays the following override message:

Rate is greater than the Ceiling defined at Tranche. Do you want to over-write the rate with the Ceiling value?

Clicking on the ‘OK’ button, the system will default the ceiling value defined at the tranche.

If you cancel the message, then you need to specify the margin rate lesser than the ceiling value to exit from the screen.

5.19.4 Propagating Margin Rate Floor and Ceiling for an Effective Date

Oracle FLEXCIBE allows you to change the application date for floor and ceiling margin rate. Propagation of margin rate floor/ceiling changes for an effective date is as follows;

5.19.4.1 Propagation for Margin Components of Margin Basis as ‘Tranche’

The propagation for any margin floor/ceiling change for margin components of Margin Basis as ‘Tranche’ is processed on the drawdowns under the tranche as follows:

If margin maintenance for an effective date is done, then the system checks if the newly maintained margin is within the floor and ceiling values applicable from the effective date of maintenance till the next effective date or the current application date. In case of any deviations, the system does not allow you to maintain such margin rates.

5.19.4.2 Propagating Margin Components of Margin Basis as ‘Drawdown’

During the batch, the propagation for any margin floor/ceiling change for margin components of margin basis as ‘Drawdown’ and VAMB/VAMI event is registered for the drawdown.will be as follows:

The system validates the necessary defaulting with the floor or ceiling rate if margin rate is less than floor value or margin rate is greater than the Ceiling value while creating the child contracts.

The initiation of the uninitiated drawdown on the drawdown value date fails if the Margin rate at the drawdown is not within the floor/ceiling defined for the margin component in tranche.Capturing All-In Rate Floor and Ceiling rates at Drawdown Level

The system validates if the All-In Rate for the drawdown is within the Floor and Ceiling range for the interest component in following conditions:

If the All-In rate is outside the boundary of floor and ceiling values of the underlying interest components of the drawdown, the system prompts highlighting the All-in rate being less/more than the applicable Floor/Ceiling value and overwrite the default value with the Floor/Ceiling All in rate maintained at the Tranche level. The defaulting will be as follows:

If the interest is calculated as part of online activity such as rate fixing, then the system displays an override message. If the validation happens as part of batch exercise such as margin rate revision, system does not display any override message, but apply the above logic to overwrite the all-in rate.

The system calculates the difference between the computed all-in rate and the corresponding floor/ceiling value of all-in rate as follows:

If the computed all-in rate is less than the floor value of all-in rate, then

Adjustment Rate = Floor value – Computed value

Revised all-in Rate = Computed all-in Rate + Adjustment Rate

Where computed all-in Rate = Base Rate + Spread + Sum of margin rates

In this case, the “Adjustment Rate” will be positive.

If the computed all-in rate is greater than the floor value of all-in rate, then

Adjustment Rate = Ceiling value – Computed value

Revised all-in Rate = Computed all-in Rate + Adjustment Rate

Where computed all-in Rate = Base Rate + Spread + Sum of margin rates

In this case, the “Adjustment Rate” will be negative.

Example

Assume the following values for an interest component at the time of new Drawdown Rate fixing:

Floor value of All In rate 6%

Ceiling value of All In rate 8%

Applicable spread 0

Sum of Margin Rates 3%

As part of rate fixing, if the base rate is fixed to 2%

Computed all-in rate = Base rate (2%) + Spread (0%) and sum of margin (3%)

Computed all in rate = 5%

The computed all in Rate is lesser than the Floor value of All-in rate. Hence, the system considers the Floor value as All-in rate for computation

Adjustment Rate = Floor value (6%) – Computed value (5%)

Adjustment Rate = 1%

Revised all-in Rate = Computed All-in Rate (5%) + Adjustment Rate (1%)

Revised all-in Rate = 6%

If the base rate is fixed to 6%

Computed all-in rate = Base rate (6%) + Spread (0%) and sum of margin (3%)

Computed all-in rate = 9%

The computed all in Rate is greater than the Ceiling value of All-in rate. Hence, the system considers the Ceiling value as All-in rate for computation

Adjustment Rate = Ceiling value (8%) – Computed value (9%)

Adjustment Rate = -1%

Revised all-in Rate = Computed All-in Rate (9%) + Adjustment Rate (-1%)

Revised all-in Rate = 8%

If the base rate is fixed to 4%

Computed all-in rate = Base rate (4%) + Spread (0%) and sum of margin (3%)

Computed all-in rate = 7%

The computed all in Rate is with the Floor and Ceiling range of All-in rate. Hence, the system considers the Computed Rate as All-in rate for computation.

Adjustment Rate = 0%

Revised all-in Rate = Computed All-in Rate (7%) + Adjustment Rate (0%)

Revised all-in Rate = 7%

5.19.5 Propagating All-In Rate Floor/Ceiling for an Effective Date

If Floor/Ceiling values of All in Rates are newly maintained/amended, the propagation for any all-in rate floor/ceiling change is handled for the active/uninitiated drawdowns under the tranche which have Fixed Interest Type Components with Rate Fixing as Yes. Propagation will happen during batch as follows:

While saving the new values of Floor/Ceilings for all-in rate for interest components across drawdowns under a tranche for the current application date, the system checks for the following validations:

Propagation to active and uninitiated drawdowns will be as follows:

Note

RTAM will not fire when base rate, all-in rate and margin are changed as part of the pro­pogation during a contract.

5.20 Viewing Floor and Ceiling Adjustment Summary

You can view or query the floor and ceiling adjustments on the drawdown contract by accessing the ‘Floor and Ceiling Adjustment Summary’ screen.

You can invoke the ‘Floor and Ceiling Adjustment Summary’ screen by typing ‘LBSFCADJ’ in the field at the top right corner of the Application tool bar and clicking the adjoining arrow button.

Note

This screen is applicable for floor and ceiling for base rate only.

You can view the following details for each record:

The following message tags will be used for ‘Floor and ceiling for base rate only‘:

Message Tags

Description

_BASE-RATE-EFF-FLOOR-CEILING_

Base rate effective of floor and ceiling

_MARGIN-WO-EFF-FLOOR-CEILING_

Margin rate without the effect of Floor and ceiling

_FLOOR-CEILING_

Adjustment happened due to FLOOR or CEILING

_ACTUAL-BASE-RATE_

User input base rate

_MARGIN-DDBASIS_

Current margin rate of Drawdown Basis

 

5.21 Floor and Ceiling for Base Rate Only

The following sections explains the details related to floor and ceiling for base rate.

5.21.1 Propogating Floor and Ceiling

For an effective date, currency and DD product/component combination:

Propagation in EOD batch is done only when Floor and Ceiling maintenance exists with effective date as application date. Online validation/propagation is done based on the latest floor and ceiling maintenance, that is the latest maintenance is taken if there is no maintenance for the current date. System always considers the latest maintenance.

5.21.1.1 Batch Propagation Process

System picks up all the tranches for which ‘Floor/Ceiling restricted to base rate’ is checked. For each tranche, propagation is done for all the drawdowns provided.

Each drawdown should pass all the below validations:

Floor and Ceiling propagation does not happen in batch, if the propagation has already happened online for the current day floor/ceiling maintenance, and also if floor/ceiling maintenance has not been changed after the online propagation

5.21.1.2 Online Propagation Process

The following online activities initiate the floor and ceiling propagation:

System checks whether the checkbox ‘Floor/Ceiling restricted to base rate’ is checked or not at the tranche level. If yes, the underlying drawdown is validated as below:

Upon successful validation, the difference between the drawdown base rate and floor or ceiling rate is propagated to underlying Drawdown’s margin adjustment component and its margin rate are adjusted accordingly. Propagation will trigger a VAMB/VAMI for the change of the rate for this margin for the drawdown.

Note

Example for usage of ‘Adjustment Rate’ with Application Date as 1st August, 2011

Consider that the following maintenance is done in the system:

The following table summarizes the usage of adjustment rate:

 

 

Base Rate

Margin

All-In-Rate

Adjustment Rate

Existing Contract

Draw­down1

11

3.5

14.5

 

F/C Propagation

Draw­down1

11

0

9.5

-1.5

 

5.21.2 Online Validations and Propagation of Floor and Ceiling

For transactions in which the drawdown base rate is not within floor and ceiling and if the new option ‘Floor/Ceiling restricted to base rate’ is ‘Yes’ for the tranche, system throws the following override message:

The user-fixed base rate is not within Floor or Ceiling and it will be propagated / updated during the save of the transaction.

Upon confirmation, propagation is initiated online during save of each of the transactions.

Note

5.21.3 Override during Online Transactions

If base rate is lesser than the Floor defined at the Tranche, system displays the following over-ride message:

“Rate is lesser than the Floor defined at Tranche. Do you want to add the difference with the Margin Adjustment component (which is maintained at the tranche level)?”

On accepting the override, during save, the difference would be added with the margin adjustment component defined at the tranche. On cancelling the override, you cannot save the transaction without giving a rate greater than or equal to the Floor value.

If base rate is greater than the Ceiling defined at the Tranche, system displays the following over-ride message:

“Rate is greater than the Ceiling defined at Tranche. Do you want to negate the difference of the rate and ceiling value with Margin Adjustment component?”

On accepting the override, during save, the difference would be negated with the margin adjustment component value defined at the tranche. On cancelling the override, you cannot save the transaction without giving a rate lesser than or equal to the Ceiling value.

5.21.4 Validating Rollover and Reprice (Renewal) Instructions

While saving renewal instructions, system provides an over-ride indicating that the base rate is not within Floor / ceiling limit. If you cancel the override, system saves the renewal instruction though the maintained fixed base rate is not within the limit of Floor/Ceiling. If you click Ok, base rate is systematically changed based on Floor and ceiling maintenance and system does not register any event for such systematic rate changes.

For Split Re-price, Split / Consolidated / Consol + Split Rollover Instructions which are yet to be processed, system does not update the margin rate in the existing instructions as part of the batch propagation. Propagation is always be based on the latest Floor and ceiling maintenance as of the renewal processing date.