21 Risk Participation

Risk participation is similar to a funded participation discussed above but acts like a guarantee for the lender. The risk participant will not immediately place any deposit with the lender, but will agree to put the existing lender in funds in certain circumstances (typically on any payment default by the borrower). The risk participant will […]

08, 15, 2015
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By whiggs

Transfer of financial assets in transactions

20 Legal nature of funded participation

In conclusion the nature of the participation arrangement is that: the participant is not a direct party to the loan agreement governing theunderlying loan; the lender does not transfer or assign rights or obligations under the loan or loan documentation to the participant; the participant has no proprietary interest in either the loan or the […]

08, 15, 2015
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By whiggs

Transfer of financial assets in transactions

19 Why you ask?

if the consent of the borrower is required for an assignment or novation; if assignment or novation is permitted but is unlikely to be obtained (for example in the borrower’s insolvency); if the proposed transferee is prohibited from being a lender of record because it is not a permitted transferee under the loan agreement (see […]

08, 15, 2015
Comments Off on 18 The issue of set off in funded participation

By whiggs

Transfer of financial assets in transactions

18 The issue of set off in funded participation

Because the participation is a contractual arrangement an additional risk for the participant is if the borrower exercises a right of set off against the lender. This could happen if the lender is a bank and the borrower has a deposit with the lender or if the lender has entered into a swap or derivative […]