What Is a Participation Loan?

Participating banks are indirect bank consortium loans in which a lead bank signs a loan agreement with the borrower, and then sells the "participating loan right" to other banks that are willing to provide loans without notifying the borrower, and the lead bank Responsible for the management of loans. In this way, the loan bank that purchases the right to participate in the loan is called a loan participating bank. Under normal circumstances, indirect bank syndicated loans are negotiated by the lead bank separately with the borrower before entering into a loan agreement, and then with other loan banks to sign a contract to sell the participating loan right, and the participating loan right is granted to the other loan bank, which And obtain this right and become a loan participating bank. According to the participating loan contract, the participating bank must give the amount of the loan borne by him directly to the lead bank. The lead bank only issues a certificate of participation in the loan right, which does not have a direct relationship with the borrower. The right to ask the borrower to repay the loan belongs to the lead bank, and the security rights stipulated in the loan agreement are also enjoyed and exercised by the lead bank, that is, the loan management right belongs to the lead bank, and the participation in the loan right contract generally stipulates whether the participating bank can be paid It depends on whether the lead bank can get liquidation from the borrower. ^[1]

Participating banks

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Participating banks are indirect bank consortium loans in which a lead bank signs a loan agreement with the borrower, and then sells the "participating loan right" to other banks that are willing to provide loans without notifying the borrower, and the lead bank Responsible for the management of loans. In this way, the loan bank that purchases the right to participate in the loan is called a loan participating bank. Under normal circumstances, indirect bank syndicated loans are negotiated by the lead bank separately with the borrower before entering into a loan agreement, and then with other loan banks to sign a contract to sell the participating loan right, and the participating loan right is granted to other loan banks, which is why the latter And obtain this right and become a loan participating bank. According to the participating loan contract, the participating bank must give the amount of the loan borne by him directly to the lead bank. The lead bank only issues a certificate of participation in the loan right, which does not have a direct relationship with the borrower. The right to ask the borrower to repay the loan belongs to the lead bank, and the security rights stipulated in the loan agreement are also enjoyed and exercised by the lead bank, that is, the loan management right belongs to the lead bank, and the participation in the loan right contract generally stipulates whether the participating bank can be paid It depends on whether the lead bank can get liquidation from the borrower. ^[1]

Under normal circumstances, indirect bank syndicated loans are negotiated by the lead bank separately with the borrower before entering into a loan agreement, and then with other loan banks to sign a contract to sell the participating loan right, and the participating loan right is granted to other loan banks, which is why the latter And obtain this right and become a loan participating bank. According to the participating loan right contract, the loan participating bank must directly deliver the loan amount he has undertaken to the lead bank, and he cannot obtain any direct rights to the borrower accordingly. The participation loan certificate issued to him by the lead bank is only a proof of his right to ask the lead bank to pay the loan amount repaid by the borrower. It cannot be used as a basis for claiming rights from the borrower, that is, the participating bank and the borrower do not occur. Direct relationship.

The right to ask the borrower to repay the loan belongs to the lead bank, and the security rights provided by the loan agreement are also enjoyed and exercised by the lead bank, that is, the loan management right belongs to the lead bank and the participation in the loan right contract generally stipulates whether the loan participating bank can be repaid or not. Whether the lead bank can get liquidation from the borrower. ^[2]