Risk Sharing – A Rising Trend

We are increasingly hearing from bank and non-bank lenders looking for ways to de-risk either all or, more usually, a portion of their exposure under a particular facility. It is perhaps a symptom of the current economic climate that these requests are becoming more frequent, particularly with respect to structured NAV trades.

Given this increased interest in the availability and typical operation of risk sharing arrangements, this week we are collaborating with Assia Damianova, a Special Counsel in our structured finance team who deals frequently with these products, to look at the options available to lenders in the European fund finance market.

Lenders look to share risk for a variety of reasons, which can include (i) credit risk mitigation, (ii) capital relief and (iii) compliance with internal policies relating to country limits, single obligor limits or corporate/sponsor group limits.