Olam International

[CY09]

Note i used the word "maybe"

Back to the topic of loans, sometimes companies may borrow short term working lines to sustain their WC and operations. Unfortunately for us, we do not know how much are the interest rates for such short term loans. If you are paying 3% for short term capital (i.e 1 -2 year loan), it is quite good business for banks.

The only downside is the frequency of rolling it over. Hopefully the arranger bank (big brother of the gang of bankers) is ready to help you willingly; otherwise the small members will not help you if big brother pulls out. Many billion dollar bank loans are syndicated loans - banks try to spread their risk among themselves. And often, the willingness of the banks to rollover their loans is by following the lead arranger, if the lead arranger sees you are in a good book and willing, likely you will be helped. And the lead arranger bank not need to have a huge stake in the deal, about 30%-40% is more than sufficient. So whats 30% to a bank who have tens or hundreds billions in loan portfoilo. Furthermore, short term loans have lower Value-At-Risk, pressure on balance sheet may not be that great after all.