What Does Underwriter Syndicate Mean?
An underwriting syndicate refers to a temporary team or group of underwriters, broker-dealers, and investment banks formed for selling a new bond and debt securities or sharing issues too large for a single entity. Thus, the idea is to pool resources to meet the need of the investors and issuer and redistribute among themselves the benefits arising from the sale of the security issue. It is also referred to as an underwriting group.
Insuranceopedia Explains Underwriter Syndicate
An underwriting syndicate comprises of a team of underwriters led by the lead underwriter who manages the affairs of the writing syndicate. Together, the team mitigates risk through spreading it out among the members. This is advantageous to the lead underwriter who would have otherwise assumed all the risk. The compensation of the underwriter syndicate is the difference in price received from the investors and the actual amount given to the issuer, a term referred to as underwriting spread.
For example, a state may decide to raise additional capital from the public through issuing bonds to finance a particular budget. This would require a team to work on the financing plan, prepare the paperwork, presentation to the investors, pricing and marketing the bond and closing the transaction. Such are the roles of an underwriting syndicate.