In bank loan financings, an arrangement whereby a lender transfers an interest in its rights under a loan agreement with a borrower to another lender or investor (the participant), however, there is no direct contractual relationship or privity between the participant and the borrower.

This is in contrast to an assignment which is a sale of all or part of the rights and obligations of a lender (the assignor) under a loan agreement to another party (the assignee). The assignee assumes a direct contractual relationship with the borrower for its portion of the loan and has privity with the borrower, giving the assignee the right to sue the borrower for breaches under the loan agreement.

For further information, see Practice Note, Assignments and Participations of Loans and Standard Clauses, Loan Agreement: Assignment and Participation Clauses.