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The Bankers Association for Finance and Trade (Baft) has revised and updated its New York law master participation agreement (MPA), eight months after reworking the English law version.

The MPA serves as the industry standard for secondary market transactions to facilitate the buying and selling of trade finance-related assets. The New York MPA was first published in 2010 in order to address US-market concerns around true sale treatment of transferred rights, and came on the heels of the 2008 release of the original version, which was governed by English law. As with the 2008 English MPA, the 2010 New York MPA was designed to simplify the exchange of documentation between banks and reduce legal costs by minimising redundancies and excessive bilateral discussions.

In September last year, Baft carried out a revision of the 2008 English MPA together with the International Trade and Forfaiting Association (ITFA), which put together a working group of experts to review the existing forms and identify necessary changes. International law firm Sullivan drafted the modernised form and its usage guidelines. Given this, and in light of significant developments in market practice and the global regulatory landscape, Baft has now also brought the New York version of the document up to date.

“The New York law MPA follows the new English law one, and the only changes are to comply with New York law,” explains Geoffrey Wynne, partner at Sullivan. “We have translated English law concepts like elevation to be used in a New York law context.”

The most significant changes between the 2010 and the 2019 New York MPAs include:

The introduction of the concept of two master parties as the only entities that are party to the agreement. One is for the seller and the other for the participant. Affiliates of the master parties are then free to conclude participation agreements without signing a separate master agreement.

Separate provisions for funded and unfunded participations, setting time limits for claims for payment from the seller. Another clause also deals with transfer of ownership rights upon payment by a participant by way of an assignment of the participation interest. It clarifies the intention of ownership transfer placing the transferred asset beyond the reach of the seller’s creditors, therefore allowing for true sale.

A new provision dealing with ‘elevation’, which sets out how and when a participant can require a full legal transfer of rights to give it direct recourse against recourse parties.

A clause on general debt restructuring. Although New York law has chapter 11 bankruptcy procedures, the updated MPA introduces the concept of general debt restructuring, for the benefit of non-US entities.

The 2019 New York MPA is designed for use by Baft and ITFA members as an industry standard. In a communiqué to its members, the ITFA board says that “widespread adoption of the new templates is crucial for simplifying how the secondary market for trade finance operates”, stressing that it is in members’ interests to avoid making changes to the main body of the new MPAs.