Assignment

In bank loan financings, the sale of all or part of the rights and obligations of a lender (the assignor) under a loan agreement to another party (the assignee). The assignee assumes a direct contractual relationship with the borrower for its portion of the loan and has privity ( www.practicallaw.com/1-382-3711) with the borrower, giving the assignee the right to sue the borrower for breaches under the loan agreement.

This is in contrast to a participation ( www.practicallaw.com/3-382-3673) which is an arrangement whereby a lender transfers an interest in its rights under a loan agreement with a borrower to another lender or investor (the participant); however, there is no direct contractual relationship or privity between the participant and the borrower.

For further information, see Practice Note: Assignments and Participations of Loans ( www.practicallaw.com/8-381-8532) and Standard Clauses, Loan Agreement: Assignment and Participation Clauses ( www.practicallaw.com/8-383-3066) .

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