AA's Brother Stumped Again But a Completely
Different Situation than AA
|
Under the
headline "UAB
front-loads syndicated term loan to $195m" the
GCC's newspaper of record, Gulf News reported that
AA is familiar with the term “upsize” used in situations like this.United Arab Bank said it has concluded of its $195 million 2-year syndicated term loan facility, 30 per cent more than the original planned amount of $150 million.
Front-load
generally refers to the paying of fees at inception of a deal or a pattern of interest payments that are initially greater than principal payments.
For example, a “load” on an investment fund
that one pays up front as the price of entry to the fund. If the load is 2% and you give the investment
fund manager USD 100, you actually only invest USD 98. As an aside, you should avoid funds with
front-end loads, unless of course you’re dealing with Bernie Madoff.
The other case
is where payments for interest are front-loaded.
For example, a fixed-rate mortgage where most of the amount of the initial
repayments the borrower makes go to paying interest and not reducing principal.
Does the term “front-load” have a different meaning in GCC? If so, what term is used for the front loaded examples given by AA?