I keep seeing this term thrown around quite a bit when it comes to banks with DCM and levFin practices. Perhaps I don't understand the underwriting process, but what exactly is meant when the debt practices of the bank have access to the firm's balance sheet?? It was my understanding that the banks immediately distribute whatever loans they structure. Why is a strong balance sheet important in this context?
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In regards to M&A, I believe it means they can provide staple financing for the buyer (ie acquisition financing for the buyer is already lined up from the M&A bank's balance sheet should they pursue the deal, making things easier/quicker)...Would presume it is similar in DCM - the bank would purchase bonds from a company and then repackage them?
Ok so while waiting for replies i'm also reading the S&P primer on loan syndication. Underwriting in levfin means that when you take on a mandate, you are guaranteeing the sale of the entire loan by purchasing the whole thing and then selling it off as soon as you can. If you are unsuccessful in the sale, you are stuck with the loan. Having a strong balance sheet allows you to take on riskier loans that can earn higher fees or hold onto the loan for a longer period of time during the sale process.
I also completely just learned this so it could be completely wrong, interested to hear what anyone else has to say.
Ya that's pretty much what i was saying
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