Term Loans, Credit Risk Transfers, and Credit Guaranties in Subscription Finance: Tailoring Loan Terms; Mitigating Risks

This CLE webinar will provide finance counsel with an understanding and overview of term loans, credit risk transfer (CRT) transactions and credit guaranties under current market conditions. The panel will explain how these subline facilities can be structured to complement conventional bank loans and provide borrowers with access to non-bank financing on less restrictive terms while also helping lenders reduce credit liabilities to create new lending opportunities.

With rising interest rates and increased capital requirements ahead under the Basel III Endgame, term loans have become a viable option for providing new liquidity and flexibility for borrowers and lenders. Typically, terms loans are a separate tranche that is favorable for lenders because the loan is fully funded within days of closing. Therefore, unlike a committed revolving credit facility, it does not require rapid deployment of capital over the life of the loan.

Credit guaranties and CRT transactions (also known as synthetic risk transfers (SRTs)) are two other tools lenders are using to mitigate their exposure, manage in-house lending limits, and increase their business lines. CRT transactions involve the transfer of credit risk of all or a tranche of a portfolio of financial assets to third-party investors. CRTs take on various forms but with each version the recipient entity assumes a credit risk in exchange for a financial upside.

There has also been a notable increase in credit guaranties. In a credit guaranty transaction, a third party, usually an insurer, agrees to function as a guarantor by pledging to repay all or part of a loan if a borrower defaults in exchange for a premium.

Listen as our authoritative panel explores the evolution and status of term loans, CRTs, and credit guaranties and offers advice for structuring these transactions.