Jurisdiction(s):
United Kingdom

Key definition

Sub-participation definition

What does Sub-participation mean? In practice, sub-participation is a secondary loan trading technique by which an existing lender transfers the economic risk and return of all or part of its debt to a third-party participant, while remaining the lender of record to the borrower. It is a market term (not defined by statute) and is commonly documented on Loan Market Association (LMA) forms. Key features include: - A purely contractual arrangement between lender and participant; the borrower is not a party and consent is not usually required. - No assignment or novation of the loan or security; legal title, payment interfaces and voting rights remain with the...

Loan sub-participation: structures, key risks, and LMA documentation for par/distressed trades (2026 updates)

Published by a LexisNexis Banking & Finance expert

Practice notes

STOP PRESS: The Loan Market Association (LMA) has released refreshed editions of the standard terms and conditions for Par and Distressed Trade Transactions, the complete set of Funded Participation and Risk Participation Agreements, and the Secondary Debt Trading Documentation User Guide, with all changes taking effect from 17 March 2026. The changes cover deletion and removal of LIBOR references, detailed amendments to IBOR rate definitions and to the Target2 definition, together with revised ERISA representations that incorporate further exemptions from the prohibited transaction rules under ERISA and the US Internal Revenue Code. The refreshed documents are accessible exclusively to LMA members via the LMA’s Documentation Hub. sub-participation enables a lender to pass its exposure in a loan to another entity. Within the loan market, it functions as an alternative to assignment or novation. For information on loan transfers in a lending context, see Practice Note: Introductory guide to loan transfers. This Practice Note:

sets out what is meant by funded sub-participation, risk-participation and credit default swaps
examines in greater depth the key consideration when entering into a sub-participation, and
reviews the recommended form Loan Market Association (LMA) sub-participation agreement for par/distressed trades

What is meant by sub-participation?...

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Jacqui Allen

Mandel, Katz & Brosnan LLP

Jacqui Allen heads the London office of Mandel Katz & Brosnan. Jacqui's practice focuses on the secondary loan trading markets and providing advice on the legal issues relating to the purchase and sale of distressed assets. Jacqui has been actively involved in the loan trading market since 1997 and has had extensive experience in various types of high-yield transactions throughout the world, including the purchase and sale of distressed and par loans, trade claims and loan restructurings. In addition, Jacqui concentrates on representing banks, hedge funds and other financial institutions that purchase and sell distressed assets in emerging and established markets in Europe, Asia and Australia....

Web page updated on 21/05/2026

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