QUESTION TWO

In syndication processes, leveraged transactions fund a number of purposes. They provide support for general corporate purposes, including capital expenditures, working capital, and expansion. They refinance the existing capital structure or support a full recapitalization including, not infrequently, the payment of a dividend to the equity holders. They provide funding to corporations undergoing restructurings, including bankruptcy, in the form of super senior loans, as debtor in possession facilities or loans. Their primary purpose, however, is to fund mergers and acquisitions activity, specifically leveraged buyouts, where the buyer uses the debt markets to acquire the acquisition targets equity.

Required:

1. Describe the functions performed by Merchant and Investment banks in Zambia. Cite at least two examples to support your answers. [10 Marks]
2. Describe what defines a merchant or an investment bank in Zambia? [5 Marks]
3. Outline the essence of syndication to an investor seeking equity financing. [5 Marks]
4. Define the distinction between:
   1. Equity financing and Debt financing
   2. Leverage Buy-Out (LBO) and Collateralized Loan Obligation (CLO) [5 Marks]