Portfolio sales

A loan can be sold on an individual basis or packaged up with other loans and sold as a portfolio pursuant to overarching terms.

The most common ways of selling loans are as follows.

Transfer of contract (cession de contrat)

A cession de contrat is a full legal transfer of the party's rights and obligations. It is a tripartite arrangement between the transferor (cédant), the assigned party (cédé) and the transferee (cessionnaire). To the extent the assigned party (cédé) has given its consent, the transferor (cédant) is released from its obligations for the future.

Assignment of rights (cession de créance)

A cession de créance is available to the extent the facility has been fully drawn. Subject to any contractual restrictions, a cession de créance can be done without the consent of the debtor.

Sub-participation

A sub-participation is a transfer of the economic interest in a loan without changing the legal relationship between the existing parties. Sub-participations involve the buyer taking on double credit risk, both on the seller as well as the borrower.

The main considerations in connection with a transfer of loan include:

• consent/notification – whether a transfer requires the consent or notification of any other parties;
• lender eligibility – whether there are any restrictions around the type of entity to which the loan can be transferred;
• undrawn commitments – whether there are any continuing obligations for further funding or other material obligations on the part of the lender that may fall on the transferee or reduce claims made by the transferee;
• confidentiality and banking secrecy – whether the seller of the loan is allowed to disclose information relating to the loan to a potential purchaser; and
• data protection – whether there is any personal data or other restricted information in the loan that should not be disclosed to a potential purchaser.