A separate contract called a loan participation agreement is structured and agreed among the banks.
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Russia's seventh-largest oil company sold $ 125 million of three-year loan participation notes Friday, managed by Salomon Brothers International.
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Salomon then created loan participation certificates backed by that loan and lined up other banks and investment banks to help sell them.
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In particular, "'loan participation "'is a cooperation of multiple lenders to issue a loan ( known as "'participation loan "') to one borrower.
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Many banks have shrugged off the Fed's warning because they have unloaded one-quarter or more of their lower-quality loans onto " loan participation funds ."
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In its suit, CoreStates said its loan participation agreement with Signet called for each party to pay for losses stemming from " any inaccuracy or other breach of any representation ."
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"If not appropriately structured, these 100 percent loan participation programs can present unwarranted risks to the originating institution, including legal, reputation and compliance risks, " said the regulators in a statement.
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Such senior / subordinated loan participations can be structured either on a LIFO ( Last In First Out ) or FIFO ( First In First Out ) basis ( see FIFO and LIFO accounting ).
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As a result primarily of irresponsible lending practices in connection with the sale of over $ 1 billion in " loan participations " to other banks throughout America, Penn Square Bank failed in July 1982.
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The guidelines, which specify, among other things, that the " participants should be limited to sophisticated financial and commercial entities and individuals with experience in dealing with loan participations, " are consistent with the court ruling.
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