Structuring Participation Agreements in Commercial Finance: Lender Due Diligence
Strategies for Lead Lenders and Participants to Minimize and Manage Risk; FDIC Guidance
Recording of a 90-minute premium CLE video webinar with Q&A
This CLE course will examine current trends in the loan participation market, critical provisions of participation agreements, and best practices in due diligence for participating lenders. The panel will also discuss FDIC regulatory guidance regarding risk management for purchased loans and purchased loan participations.
Outline
- Overview of loan participations
- Market trends
- What is a "participating interest"?
- What are the essential characteristics?
- High priority participation agreement provisions and how they differ from syndications
- Lender voting rights
- Defaulting lenders
- Borrower workouts, foreclosures
- Seller reps and warranties
- Reclaiming or buying back transferred participation
- Considerations
- Circumstances where loan participation is a "true sale" of the underlying loan
- Situations in which a participated loan may be subject to another's security interest
- Automatic perfection
- Settlement conventions/implications of delayed settlement; how loan sellers may obtain settlement liquidity coverage
- Due diligence by the participating lender
- Understanding and reducing the selling counterparty risks
- Considering the participation structure and lender rights risks
- How much do you review the borrower group deal and how much do you rely on representations?
- FDIC FIL492015
- Understanding the advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations
- Workouts in participations: What is the effect on and effect of participant rights?
Benefits
The panel will review the issues that arise from these concerns, among other critical questions:
- What are the crucial points to address in a loan participation agreement?
- What are the lessons from recent litigation regarding loan participation agreements?
- When is a loan participation considered a "true sale" of the underlying loan, and why does it matter?
- What specific information should participants or purchasers obtain from the lead lender or seller before entering into the transaction, and what other diligence is essential?
- What guidance does the FDIC provide banks in performing due diligence to minimize risks of participation from alternative non-bank lenders?
Faculty
Dr. Alison R. Manzer
Partner
Cassels Brock & Blackwell
Dr. Manzer is a partner in the Banking & Specialty Finance Group and Business Law practice. She has developed... | Read More
Dr. Manzer is a partner in the Banking & Specialty Finance Group and Business Law practice. She has developed expertise in a wide range of practice areas combining skills to work effectively in most corporate/commercial practice areas, with a focus on financial services and structured transactions. Dr. Manzer's recent experience includes block chain and fintech applications. Her cross-border expertise has led to several leadership roles in leading U.S. business law organizations such as the American College of Commercial Finance Lawyers and the American Bar Association. Dr. Manzer has written many books on legal topics, primarily in areas of banking and specialized finance, and routinely lectures and speaks on a wide range of topics.
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James C. Schulwolf
Partner
Shipman & Goodwin
Mr. Schulwolf is a partner in Shipman's Business and Corporate Practice Group. He focuses his practice on... | Read More
Mr. Schulwolf is a partner in Shipman's Business and Corporate Practice Group. He focuses his practice on advising clients in financing, investment, acquisition, and restructuring transactions. In the Finance sector, Mr. Schulwolf regularly represents financial institutions including banks, mezzanine funds, and other institutional investors in structuring, documenting, and closing complex senior and mezzanine financings, including mezzanine financings with equity co-investments. He regularly represents lenders in connection with acquisition financings, financing of alternative energy projects (including wind, solar, and fuel cell projects), asset-based loans, cash flow loans, and syndicated credit facilities and he also represents Shipman's corporate clients and private equity portfolio companies in their financing transactions.
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Jeffrey A. Wurst
Attorney
Bodner Law
For nearly 40 years, Mr. Wurst has been a nationally recognized leader in the commercial finance community where he has... | Read More
For nearly 40 years, Mr. Wurst has been a nationally recognized leader in the commercial finance community where he has represented large and small banks and commercial lenders as well as family-owned businesses providing sound advice and counselling on both legal and business matters. He is widely recognized for his hands on representation in commercial finance and bankruptcy matters. Mr. Wurst is skilled in his handling and supervising of complicated as well as routine debt finance transactions and is regularly called upon to handle loan workouts, asset-based lending, factoring, syndications, leasing and C&I, as well as bankruptcy matters, and turnaround situations stemming from transactions. He is called upon to provide advice to emerging finance companies. Mr. Wurst has spent a lifetime representing lenders and borrowers in both federal and state insolvency proceedings, including debtor-in-possession financing, disputed use of cash collateral, assignments for benefit of creditors and secured party sales under Article 9 of the Uniform Commercial Code. He is a fellow of the American College of Commercial Finance Lawyers and a panelist on the American Arbitration Association’s National Roster of Arbitrators.
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