Loan Participations: Risks and Rewards Webinar

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
• Subparticipations
• Set-off by a participant
• Understanding the participation agreement