4.9.6 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	15
BARCLAYS	50	15	5
NATWEST	20	6	Nil

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