What is a loan sub participation?
Related Content. Also called participation. The terms sub-participation and participation have no strict legal meaning. In the context of finance transactions, it refers to when a lender under a loan agreement sub-contracts all or part of its risk to another financial institution.
What does syndicating a loan mean?
Loan syndication is the process of involving a group of lenders in funding various portions of a loan for a single borrower. Loan syndication most often occurs when a borrower requires an amount too large for a single lender to provide or when the loan is outside the scope of a lender’s risk exposure levels.
What does the loan market Association do?
As the authoritative voice of the syndicated loan market in EMEA, we work with lenders, law firms, borrowers and regulators to educate the market about the benefits of the syndicated loan product, and to remove barriers to entry for new participants.
What is a risk participation agreement?
Risk participation is an agreement where a bank sells its exposure to a contingent obligation to another financial institution. These agreements are often used in international trade, although they remain risky. Syndicated loans can lead to risk participation agreements, which sometimes involve swaps.
Is loan trading on the secondary market a regulated activity?
In general, secondary loan trading is not regarded as a regulated activity for the purposes of UK financial regulation.
What is an Intercreditor?
An Intercreditor Agreement (or inter-creditor deed) is a contract between two more creditors. Such an agreement comes into effect when the borrower has two (or more) lenders. Usually, there are two creditors in an inter-creditor agreement – one senior and the other subordinate or junior lender.
How do I join LMA?
Membership is offered at the institutional level only and is subject to completion of the online application, acceptance of that organisation by the LMA and payment of the relevant fee. Membership will commence only once the subscription fee is received by the LMA.
What is the difference between participation and syndicated loans?
With participations, the contractual relationship runs from the borrower to the lead bank and from the lead bank to the participants, whereas with syndications, the financing is provided by each member of the syndicate to the borrower pursuant to a common negotiated agreement with each member of syndicate having a …
What is the difference between consortium and syndication?
A loan syndication usually occurs when multiple banks lend money to a borrower all at the same time and for the same purpose. In the financial world, a consortium refers to several lending institutions that group together to jointly finance a single borrower.
What is a loan market?
loan market. noun [ C ] FINANCE. the market where financial organizations provide loans to borrowers and sometimes repackage them (= sell them on to investors): consumer/domestic/home loan market The consumer loan market has been the fastest growing sector in recent years.
What is a participation interest?
Participation Interests Participation Interest means the Extension of Credit by a Lender by way of a purchase of a participation in Letters of Credit or LOC Obligations as provided in Section 2.2 or in any Loans as provided in Section 3.8.
Which is a key pillar of a loan participation agreement?
key pillar of a loan participation is the grantor’s actual ownership of the underlying loan. A grantor of a loan participation must represent to the paÍicipant that it owns the loan that is subject to the participation. As discussed above, under an LSTA-style participation agreement, the grantor transfers
How does a sub-participation agreement work for a grantor?
Consequently, the sub-participation creates a debtor/creditor relationship between grantor and sub-participant. Under such arrangement, grantor is generally obligated to pay to sub-participant a pro rata amount equal to principal, interest, fees and other distributions received by lenders under the credit agreement.
Can a grantor unwound a LMA subparticipation agreement?
Given the derivative nature of the LMA form of subparticipation agreement — the underlying loan is the property of grantor — there is a potential risk that the transaction would be unwound if the transfer or elevation were to occur on the eve of insolvency.
How does the LMA work for funded participations?
Under the LMA standard documentation for funded participations, the Participant pays the Grantor an upfront lump sum payment calculated on the outstanding amount of the Loan, multiplied by a discount rate if the Loan is trading below par and any additional fee. This upfront lump sum payment is non-refundable.