Testing loan participation agreements in the UK

Author: IFLR Correspondent | Published: 23 Aug 2016

Patrick Clancy, Steven Sherman and Alastair Goldrein, Shearman & Sterling

The authors (and their colleagues) reviewed in this magazine in April 2016 the rights established by a New York law participation agreement in respect of a loan asset of an English lender (Bridge across the pond, IFLR April 2016). 

That article noted that the English law insolvency proceedings of Lehman focused attention on numerous legal issues, including the rights of third parties in their assets held by distressed financial institutions. In a customary New York law participation agreement, one of the rights of the participant (referred to here as the purchaser) is to have the seller (lender), upon request, elevate the participation to a direct holding of loan interest by the purchaser by way of an assignment.  The article referred to the issue of the ability of a purchaser to exercise that right during an insolvency type proceeding of...