Risk Participation

Monday, September 1st, 2014

A back-to-back arrangement provided on either a funded or unfunded basis. The Grantor (existing lender) enters into an agreement with the Participant which does not put it into a direct legal relationship with the Borrower so that from the Borrower’s perspective, its lender remains the Grantor. The contractual rights are then created through the Risk Participation Agreement between the Grantor and the Participant only. An unfunded Risk Participation Agreement is one whereby the Participant receives a fee but does not fund the participation amount unless such facility is in default. The most widely used form of Risk Participation is published by BAFT and is available in English and New York law versions.