Understanding Loan Sales

Has your bank loan been sold?

Is your Bank in the process of selling your loan?

How does this affect you and should you be worried?

  1. Your loan has been sold to a third party not of your choice with whom you may not have chosen to do business.
  2. The new purchaser has very different goals and practices from a traditional Bank. The new purchaser is likely to be a Private Equity Fund. A private equity fund will have a completely different business model from a traditional bank. The purchaser may not be in the business of lending money at all, but in acquiring assets.
  3. It is likely your loan will be sold with all security attached including personal guarantees, debentures, charges, intercompany guarantees etc.
  4. If your loan is in default when it is sold, the purchaser will potentially have the same rights as your old bank. These rights include calling in the loan, enforcing the security by way of fixed charge receiver or administrators, and increasing interest payments and fees. It is, however, recommended that these points are fully investigated by a professional.
  5. You may be able to achieve a better outcome with the Private Equity Fund than would have been possible with your old Bank. This can be achieved through refinancing and/or various work out strategies.
  6. The sale of your loan gives you the opportunity to negotiate with the private equity fund to potentially achieve a favourable outcome for you and your business.

What can you do? What are your rights?

The terms of your contract are usually detailed in your facility letter. The most common terms are as follows:

  • Bank can transfer without any restriction or requirement to notify the borrower in advance
  • Bank must notify the borrower of its intention to transfer the loan
  • Bank is required to consult the borrower in advance of any transfer
  • Bank can only transfer to certain types of purchaser
  • Borrowers consent is required to transfer the loan.

GDP can assist you in negotiating with both Bank and Private Equity Company and turn these events into an opportunity to address your debt position. Our services include:

  • Detailed and expert review of your banking contracts and security documents
  • Subject to your current contract with your Bank, GDP maybe able to negotiate with your bank to prevent your loan sale or arrange favourable terms of sale
  • Assist you in negotiations with the loan purchasers to agree a settlement and/or work out strategy
  • Advise you on the legal process to objecting to your loan being sold
  • Introduce you to a new capital partner. GDP has  very strong relationships with institutional banks, private funds and other forms of investors.

Please contact our offices on 028 92 444 555 for a confidential discussion about how a loan sale will affect you.

By Louis Watters ACA