In the field of investment banking, syndicate plays a very important role in the process of companies raising funds through bond issuance. It is responsible for building investor order books, conducting pricing communication, allocating securities, and providing aftermarket support. The syndicate team works closely with sales, trading, research, and debt capital markets divisions. This article will elaborate on the key functions, structure, and workflows of the syndicate department in major investment banks.
Syndicate is in charge of investor marketing and book building for new bond issues
The primary responsibility of the syndicate desk is to market new bond issuance to institutional investors and build a book of orders. They communicate with accounts like asset managers, pension funds, insurance companies, hedge funds, etc. and gauge demand for the new issue. The syndicate desk gathers feedback on deal terms, size, maturity, and pricing from investors. This process is known as book building and allows syndicate to determine optimal transaction structure and pricing. Based on investor demand, syndicate will recommend the final price and allocation to the issuer.
Syndicate desk works closely with sales and trading divisions
While pitching new bonds to investors, syndicate maintains close coordination with the sales and trading teams. Sales team provides crucial investor relationships and distribution power. Trading desk assists in secondary market activities like market making. The inputs from sales and trading help syndicate better assess investor appetite and aftermarket liquidity. There is frequent communication between the desks during the book building process.
Syndicate coordinates with research and DCM teams
The equity and credit research analysts produce reports to educate investors on the issuer. Research analysts participate in investor meetings to provide their views. Debt Capital Markets (DCM) structurers work on the bond terms and legal documentation. Syndicate incorporates feedback from research and DCM to fine tune marketing materials and messaging. The insights from research and DCM enhance syndicate’s ability to garner strong investor demand.
Syndicate undertakes critical pricing and allocation decisions
Based on the investor book, syndicate provides pricing recommendations for new issues and discusses them with the issuer. The final price needs to balance the issuer’s preferences and investors’ expectations. Syndicate also determines the bond allocation to accounts in a fair manner. They ensure there is proper diversification across regions, client types, and maturities. Effective pricing and allocation decisions are critical for the success of a new bond offering.
Syndicate supports secondary market trading after new issue pricing
Post pricing, syndicate remains involved to support healthy aftermarket trading. They monitor secondary market activity and provide color to investors on trading levels. Syndicate may step in to provide liquidity if the new issue weakens in secondary trading. They address investor queries and manage the transition from primary market issuance to secondary market trading. Syndicate’s involvement ensures a smooth debut for the new bond issue in the secondary market.
In conclusion, the syndicate desk plays an indispensable role in the bond issuance process at investment banks. They coordinate across various divisions to market the deal to investors, build order book, recommend pricing, allocate bonds, and support secondary trading. The syndicate team’s investor relationships and market insights contribute significantly to the success of debt capital raising transactions.