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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Thursday, October 10, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00

This course is $0 with these passes:

CLE
ALL

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.

Faculty

James C. Schulwolf
Partner
Shipman & Goodwin LLP

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, PLLC

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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Alison R. Manzer
Partner
Cassels Brock & Blackwell LLP

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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Description

Banks and other lenders have historically purchased loan participations to achieve growth, employ funds, diversify credit risk, and deploy liquidity. Litigation between originating and participating banks highlights the critical nature of the loan participation agreement in protecting the interest of all parties to the transaction.

Primary provisions of the participation agreement include, among other things, lender voting and other rights and obligations of each party to the participation, seller representations and warranties, transfer provisions, and reclaiming or buying back the transferred participation. Getting these terms right and understanding the necessary diligence reviews are crucial for successful participation.

The FDIC, in its Financial Institution Letter 492015, sets out the risks of loan participations originated by non-bank lenders and guides lender due diligence in managing risks associated with these transactions. The agency's concern is that banks rely on these alternative lenders to underwrite the loan origination without proper review and analysis of the underwriting models of these alternative lenders.

Listen as our authoritative panel of finance practitioners looks at the current state of the loan participation market and discusses best practices for drafting or reviewing high priority provisions of participation agreements and sufficient due diligence for lenders. The panel will also discuss the FDIC guidance on risk management for purchased loans and purchased loan participations, as well as some recent case studies related to loan participations.

Outline

  1. Overview of loan participations
    1. Market trends
    2. What is a "participating interest"?
    3. What are the essential characteristics?
  2. High priority participation agreement provisions and how they differ from syndications
    1. Lender voting rights
    2. Defaulting lenders
    3. Borrower workouts, foreclosures
    4. Seller reps and warranties
    5. Reclaiming or buying back transferred participation
  3. Considerations
    1. Circumstances where loan participation is a "true sale" of the underlying loan
    2. Situations in which a participated loan may be subject to another's security interest
    3. Automatic perfection
    4. Settlement conventions/implications of delayed settlement; how loan sellers may obtain settlement liquidity coverage
  4. Due diligence by the participating lender
    1. Understanding and reducing the selling counterparty risks
    2. Considering the participation structure and lender rights risks
    3. How much do you review the borrower group deal and how much do you rely on representations?
  5. FDIC FIL492015
    1. Understanding the advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations
  6. 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?