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Connor Authors Two-Part Series on Loan Participations for ABA’s Commercial Law Newsletter

Notes That Agreement Language Often Lacks Clarity; Can Lead to Confusion and Dispute

November 21, 2012

Andrew H. Connor, member in the Corporate Finance practice group and a practitioner in business and corporate law for more than three decades, has written a two-part series, “Loan Participations—Time For Another Look,” that appeared in the Summer and Fall 2012 issues of the American Bar Association’s Commercial Law Newsletter. This publication is a joint newsletter of the Commercial Finance and Uniform Commercial Code Committees, both of which fall within the Business Law Section of the ABA.

The first installment of this series defines the nature of a loan participation agreement, explains how loan participations differ from other loan arrangements (such as independently extended loans, “club” loan facilities and syndicated facilities), and addresses the lack of clarity in the language used in many loan participation agreements that too often leads to confusion and dispute between the lender and the participant when unanticipated circumstances arise.

The second installment examines caselaw regarding loan participations, specifically what interest the participant holds—a claim against the borrower or a claim against the lead lender—and how the courts have ruled on a variety of famous loan participation cases. In his conclusion, Connor provides nine detailed suggestions to make the language of loan participation agreements more clear and precise, so as to minimize the likelihood of disappointment and dispute between the signing parties when situations change.