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Transfer restrictions in leveraged lending transactions: time for a re-assessment?
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European leveraged lending practitioners will need no telling that documentary terms have been something of a one-way moveable feast in favour of borrowers and sponsors for a number of years. In particular, the extent of a lender’s right to transfer its participation in a loan facility to another institution has been gradually eroded, with the “new normal” including significant fetters on transfer rights. Meanwhile, capital reforms continue to increase the cost to bank lenders of holding loans on their balance sheets and have resulted in banks seeking to optimise their balance sheets through sales in the secondary loan market and through the use of synthetic risk transfers. Is it therefore, time for bank lenders to re-assess the acceptability of transfer restrictions and to push for fewer restrictions?1
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