In summary, when a lender suffers a deterioration in credit quality, particularly if this may lead the recipient to initiate formal insolvency proceedings, a sub-participant should take into account the recklessness of the lessor`s performance risk and the risk of becoming an unsecured creditor in the event of the lender`s insolvency, by requesting an immediate increase in any partial participations. If such an increase is not possible or is not requested, a sub-participant should also consider requesting the transfer of the lender to a data station to a third party agency in order to negotiate and obtain a new partial interest in that third party. The main drivers of the success of this type of contract on the Spanish market are that (i) the main bank can remove non-performing debt securities from its balance sheet; (ii) that international investors have acquired a credit position without having to deal directly with the debtor and without having to pay stamp duty or any other type of notarized fees related to the transaction; and (iii) allow the leading bank to transfer risks without taking a sale that could be costly and is sometimes prohibited or limited by the underlying loan agreement. On the reference date, the issuer will enter into a bank savings sub-participation contract (the bank savings sub-participation contract). Under the under-participation agreement, the parties agree that the existing lender will only make payments to the member if it has received equivalent amounts from the borrower under the loan agreement, i.e. a leading bank that uses a sub-participation agreement while beginning with the application may encounter enforcement difficulties. If the borrower discovers the partial participation and objects to the payment on the basis that the debt is contested (a credito litigioso) or on the basis that the effective creditor has lost the advantage of the corresponding guarantee, he may ask the court to terminate the execution of the guarantee on the basis that the partial participation must be rectified as a transfer and that this assignment does not include the corresponding guarantee. Similar problems could arise in the event of insolvency. Copyright (Article 1.535 of the Spanish Civil Code): a debt becomes “contentious” (also known as the disputed credit) from the moment a debtor files his formal defence on a creditor`s request for payment.
When a disputed loan is granted to a third party, the debtor has the right to delete the debt (within nine days of the date the purchaser requests payment) by repaying the price paid by the purchaser for the acquisition of the disputed loan (as well as court costs and interest on the price from the day of payment). The loss of the guarantee on the basis that the transfer does not involve the transfer of security rights, so that the participant cannot benefit from the guarantee, especially when it comes to Spanish security rights which, in most cases, require registration or public acts.