Risk Participation

A funding arrangement between a creditor under a Facility Agreement and a third party (participant) pursuant to which the participant undertakes to pay to the creditor funds corresponding to Principal or interest due and payable by the debtor to the creditor under the Facility Agreement in the event that the creditor does not receive such funds from the debtor.

A participant may have rights to influence how the creditor exercises its discretion under the Facility Agreement but usually only when the risk participation relates to the whole of the creditor’s Commitment and loans. Risk participations are particularly appropriate in respect of Revolving Facilities or where the creditor’s Commitment relates to a Contingent Liability such as a Letter of Credit.

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