Listing Loan Participating Notes in the Cayman Islands

Given a recent upsurge in both the instructions and general inquiries we have received in connection with listing loan participating notes (“LPNs”) on the Cayman Islands Stock Exchange (the “CSX”), this advisory provides you with some of the material details you will need to know before embarking on such a listing.

The primary structures involving LPNs include transactions where:

  • a bank originates a loan and then sells that loan to a special purpose vehicle which issues LPNs to finance the acquisition of the loan;
  • an orphan special purpose vehicle is established to issue LPNs in the marketplace for the sole purpose of financing a loan to be made directly by the special purpose vehicle to the underlying obligor/borrower;
  • a bank originates a loan and then grants a participation to a special purpose vehicle (often a Cayman Islands trust, in the context of Latin American financings), the acquisition of that participation being funded by the issuance of notes in the capital markets.
In each structure, cashflows referable to the loan (or participation) are used to make payments on the LPNs.

 

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