<p>It sounds like you're talking about a leveraged buyout. In these transactions, a private equity firm (or sponsor as you call them) will acquire an operating company. The debt for the acquisition - raised via the capital markets - will reside on the target company's balance sheet. This debt will be used to pay the previous owners (another PE firm, founders, etc.. whoever owned the company previously). The PE firms will never take debt onto their own balance sheet, and during the course of ownership often raise additional debt on the company to pay themselves dividends.</p>

CC BY-SA 4.0
2018-08-24T09:11:48.607Z
2018-08-24T09:11:48.607Z
Ben
<p>I am trying to understand what is the difference between the <em>Borrower</em> and the <em>Sponsor</em> entities in a syndicate loan agreement.</p>

<p>Namely, it looks like quite often, the <em>Borrower</em> entity will be a Company that is getting acquired by the <em>Sponsor</em> entity - what I don't understand is if the Sponsor is acquiring the Company, why isn't the Sponsor borrowing the money?</p>

<debt>
Syndicated Loans Terminology - Borrower & Sponsor
user19214
# Syndicated Loans Terminology - Borrower & Sponsor

(Asked by: username_0 on 2018-08-22)

I am trying to understand what is the difference between the *Borrower* and the *Sponsor* entities in a syndicate loan agreement.

Namely, it looks like quite often, the *Borrower* entity will be a Company that is getting acquired by the *Sponsor* entity - what I don't understand is if the Sponsor is acquiring the Company, why isn't the Sponsor borrowing the money?

**Tags:** debt

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## 1 answers

### Answer by username_1 on 2018-08-24. Score: 1

It sounds like you're talking about a leveraged buyout. In these transactions, a private equity firm (or sponsor as you call them) will acquire an operating company. The debt for the acquisition - raised via the capital markets - will reside on the target company's balance sheet. This debt will be used to pay the previous owners (another PE firm, founders, etc.. whoever owned the company previously). The PE firms will never take debt onto their own balance sheet, and during the course of ownership often raise additional debt on the company to pay themselves dividends.


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