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The value of clarity and focus in fixing participation problems |
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By Dave Weir and Curt Petersen, partners and co-founders of Lenders Capital Resources, LLC, Wayzata, Minn. This is a companion to their article, “Haunted by the Ghost of Loan Participations Past and Present?”
Whether or not the “voting group” exercises its right to reclaim servicing in those instances where the servicer’s performance warrants that and the participation agreement permits it, in the short term that choice is less relevant than:
1. The value that accrues to each participant from adhering to safe and sound banking and risk management practices.
2. The benefits of a knowledgeable and compensated participant/leader who, on behalf of the entire participant group, engages expert legal and business counsel appropriate to the credit to create objective, independent underlying supporting documentation for more transparent, informed decision making.
3. The speed of implementing loan recovery strategies and tactics.
4. Avoiding significant amounts of time, expense, and delays by each participant functioning as an independent unit, rather than as part of a proactive group.
5. Increasing the collateral value and marketability of the participation interests in the event of a potential sale.
[This article was posted on March 12, 2010, on the website of ABA
Banking Journal, www.ababj.com, and is copyright 2010 by the American
Bankers Association.]
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