The administrator manages the loan facility on behalf of the group of lenders. As a general rule, the representative is responsible for all formal communications between the lenders and the borrower, as well as the payment of the proceeds of the loan. All guarantees that provide the loan facility are generally guaranteed by the borrower granting interest on the real value to the management agent (or another lender designated as a security guarantor) for the benefit of the lenders. In the event of participation, the participant does not have direct rights against the borrower, but does not have direct obligations arising from the loan agreement (for example. B loan bond). In addition, the participant may have the right to prevent any substantial economic change in the credit contract. If the lender gives such a veto to the participant, the participant may block a complete restructuring of the facility, regardless of the amount of the loan share. Since the participation agreement must be in accordance with the terms of the credit agreement, it is advisable for the lender to carefully analyze the terms of the credit agreement to ensure that there are no inconsistent provisions. Even if the member does not have direct rights to the borrower, the member may retain his rights under the credit facility as part of the participation agreement. It is significant that participation agreements allow the participant to prevent any substantial changes to the credit contract and a substantial waiver of the lender`s right.
It is also not uncommon for the credit agreement to confer rights on third-party beneficiaries when participation is contemplated at the time of the lender`s renewal of the original loan. In most participation agreements, the initial lender`s interest in the loan is sold directly to the participant and the original lender does not become a representative, agent or agent of the participant. In order to ensure that such a relationship is not implied, the participation agreement should expressly provide that the relationship between the lender and the participant is that of a buyer and seller, and the intention of the participation is to transfer the full economic rights of the lender to the subscriber without establishing a fiduciary or agent relationship. When arreverising a particular credit agreement, lenders should assess the different credit structures and the benefits and risks associated with them. Financing from several lenders offers lenders the opportunity to share credit risks with other lenders and diversify their loan portfolios using other credit options. Loan holdings allow a lender to participate in a credit contract without interrupting credit control and announcing its presence to the borrower and the global credit market. Syndicated loans offer other lenders direct rights against the borrower and are structured to facilitate the management and use of large or complex loans. In order to ensure that a lender can structure a credit facility to meet its needs and properly protect its rights, it is of the utmost importance that a lender be aware of the most important differences between equity and credit systems, especially when the underlying credit is in trouble.