These main versions of the equity agreements were developed in the form of industry documents used by banks to facilitate the purchase and sale of risks related to the exchange of countries and banks. These agreements are intended to simplify the exchange of documents between banks and reduce legal costs by minimizing layoffs Export credit insurance is an insurance credit facility issued by a lender to an exporter and designed to protect the exporter from the risk of non-payment by a foreign importer. Export credit insurance can be short-term or long-term. This financing facility can be transferred to a participant through a master participation contract. In the case of a syndicated loan, the rights, obligations and obligations of the borrower and lenders are generally governed by a syndicated credit contract, while in the case of a risk-sharing transaction, the rights and obligations of the lender and the participant are governed by the Master Risk Participation Agreement. The parties intend to enter into this agreement, with each party able to sell and purchase part of a qualified loan from the other party. Loans sold may relate to loans in a portion`s portfolio or loans that will be made in the future. The seller, buyer and service of a given loan or set of loans are identified as “A” in the certificate of participation in the loan. The certificate of participation also contains all the economic conditions of participation in the participation and identifies the loan, the guarantee (if any) and the identity of the borrower.
The obligations and rights of the parties involved are described in more detail in the terms and conditions of sale that are annexed as an addendum “B”. Packageing, also known as trade packages, is a means of obtaining liquidity in trade finance, where exporters receive liquidity by selling their receivables abroad (medium and long term) at a discount and on “no recourse”. In principle, without recourse or not, the package takes care of and accepts the risk of non-payment. In this case, a packager is a specialized financial institution or banking department that carries out export financing transactions without resorting to the purchase of medium- and long-term debts from an exporter. In this case, a master risk-taking contract can be used to transfer a lender`s interest on a borrower`s receivables to a participant. In the package, a borrower`s receivables are usually guaranteed by the participant, the importer`s bank. There are various possibilities for the use of master-participations, which are mainly in the area of trade finance. Some of these uses are explained below: the International Trade and Forfaiting Association (ITFA) was established in 1999 as an association of banks and financial institutions that are in the field of origin and distribution risks in the financial sector.
ITFA first published the New York Master Participation Agreement in 2009, which was updated in 2019. The updated New York Master Participation Agreement for Unfunded Participations reflects the updated BAFT Master Participation Agreement. The updated New York Master Participation Agreement is intended to standardize the documents used in commercial financing operations. This will ensure that banks, bank customers, government authorities and investors better understand and use trading financial assets. With respect to capitalization risk participation, it was agreed that the participant will finance the original lender to enable the lender to meet its obligations under a request for intervention under the credit contract between the borrower and the original lender. The initial lender then sells its shares in the loan to the participant. In addition to the credit-sharing problems that lenders should avoid, as noted above, which are primarily fuelled by changes to the standards in place under the SAS, lenders should ensure that the terms of their loan participation agreements protect against the unfortunate consequences.