Advantages of a participation to the lead bank and participant bank
Risks to the participant
- Lack of information
- Lack of involvement in negotiations
- Dependency upon lead
- Waivers
- Financial instability/insolvency of lead
- Set off by borrower
- Asset-Based Lending
- Conflicts of interest
Due Diligence by the participant and access to information
Disclosure of participation to borrower
Concentrations and other regulatory aspects of participations
Loan agreement provisions related to participations
Duties owed by lead to participant
Rights to loan collateral and guaranties
Loan administration issues
- Loan payments and other functions
- Consent to amendments
- Restrictions on transfer
- Loan purchase options
- Reimbursement and indemnification obligations
- Sub participations
- Set off by a participant
- Understanding the participation agreement
The participant’s checklist
The participation in workout
Loan participations can be beneficial to both the lead bank and the participants although they can also involve significant risks. Join us for this comprehensive overview of loan participations and their risks and rewards.
