Opinion ID: 3004769
Heading Depth: 2
Heading Rank: 2

Heading: participation agreement

Text: The relevant provisions of the participation agreement can be grouped into four categories. The first consists of provisions characterizing the parties’ legal interests in the notes, which specify that CFS is the holder of the notes and the other parties, including Realty, have an interest in the notes entitling them to participation in revenue derived therefrom. Aplt. App. at 22 (Recital A), 24 (para. 2). The second category consists of provisions generally indicating that mortgage refinancing is to be done for the benefit of both CFS and participants such as Realty: Para. 4(d): “[R]efinancing of the existing mortgages shall be undertaken for the benefit of the holder of the Notes and to the extent permitted by the lender, the new loans shall be made for, on behalf of, or in the name of the holder of the Notes.” Recital D: “[The parties] desire to have the mortgage loans on the apartment projects refinanced for the benefit of the Wrap Loan Lenders (as defined below [to include all participants in the agreement]).” Id. at 22, 25; see also id. at 24 (Recital L). The third category consists of provisions specifying how the parties share in revenue derived from the notes, including excess proceeds from refinancing of the primary mortgages. These establish that the parties share in proportion to their interests in the notes. See id. at 24 (Recital K and para. 2), 26 (para. 8). The fourth category relates to the parties’ rights with respect to negotiation of mortgage refinancing. It consists of a broad provision granting the parties a right of 4 final approval over refinancing negotiations and a specific provision dealing with agreement on particular loan-to-value ratios: Para. 5: This paragraph designates a representative for negotiating “for the purpose of having the first mortgages on the [projects] refinanced,” but provides that “all distribution participants have final signatory approval of such negotiations.” Para. 4(b): “The existing mortgages shall be replaced with new mortgages at a loan to value, as mutually agreed by the participants, as the value is determined by a current appraisal.” Id. at 25-26. Finally, what the agreement does not say is also significant. There are no provisions stating that (1) its purpose is to obtain excess refinancing whenever possible to maximize revenue from this source; or that (2) notwithstanding the right of final approval in paragraph 5 and the requirement of mutual agreement as to loan to value in paragraph 4(b), parties must consent to excess refinancing whenever it is available unless a specific objection is raised on loan-to-value grounds.