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Appeal of Shared National Credit (SNC)-(Fourth Quarter 2016)


A participant bank appealed the substandard rating assigned to a credit facility during the August 2016 SNC examination.


The appeal asserted that the credit had appropriate underwriting features at the time of its restructuring, as well as demonstrated financial performance, to support a pass rating. The appeal argued that the credit does not meet the definition of a substandard loan because the loan is supported by healthy debt coverage ratios, low loan-to-value ratios, high occupancy rates, and good-quality tenants.


An interagency appeals panel of three senior credit examiners agreed with the appeal and assigned a pass risk rating to the credit.

The appeals panel concluded that the credit facility should be rated pass due to the sustained performance of the two collateral properties, adequate collateral support, and strong controls.

The collateral properties for this restructured facility are occupied primarily by the U.S. government and other government agencies under long-term leases that provide adequate cash flow to service debt, with a debt service coverage ratio materially over 1.0 times. Collateral coverage is satisfactory and the tenants send lease payments directly to the agent bank.