Elegant and Cost-Effective

The Alpina Corporate Assurance Program requirements enable us to accept either a Bank Guarantee / Standby Letter of Credit (BG/SbLC), Commercial Promissory Note, (“avalized” by a bank, or AvPN) or Sovereign Guarantee (SG).

Credit Enhancer

A CREDIT ENHANCER IS A FINANCIAL INSTRUMENT USED TO IMPROVE THE creditworthiness of a party in the issuance of a security or other type of financing transaction. The purpose of using a credit enhancer is to reduce the credit risk in the transaction by guaranteeing investors. There are several types of instruments used as credit enhancers. 

A Standby L.O.C.

The global rule sets which govern standby letters of credit (SbLC) - both the Uniform Customs and Practices current revision 600 (UCP 600) and International Standby Practices current revision (ISP98) - define a SbLC as an “undertaking”. 

An undertaking provides the named beneficiary with an “independent” assurance of payment from the undertaking’s issuer (issuers are most often banks).

A Bank Endorsed Promissory Note

An Avalized Promissory Note (AvPN) is similar in most respects to the BG/SbLC; it is governed by the same banking rules, for example.  Main difference:  while a BG/SbLC comes from an issuing bank, the AvPN is company-issued then stamped and endorsed (avalized) by a rated bank, which if properly understood solves several challenges with BG/SbLCs.

Starting the Program

Alpina’s pre-qualification is fairly easy and consists of the following basic information, broken into the sequence of steps most often used to produce the essentials that secure your project funding. This funding delivers advantageous terms and is structured to solve notorious problems with the traditional approach to mid-market project finance.

The Independent, Confirmed SbLC shall:

  1. Be a direct pay, standby letter of credit;
  2. Be issued by an Eligible LC Issuer, substantially in the form of Appendix 1, provided that any deviation from the form of Appendix 1 shall be subject to Alpina’s approval in its reasonable discretion. If the bank issuing the letter of credit fails to remain an Eligible LC Issuer, the Project Owner shall provide a substitute letter of credit issued by an Eligible LC Issuer within 30 days of notice by Alpina of noncompliance or otherwise furnish replacement security acceptable to the Owner; 
  3. Be payable immediately, conditioned only on written presentment by Alpina to the issuer of a sight draft drawn on the letter of credit as provided in the applicable form of letter of credit attached as Appendix 1;
  4. Be in place for the entire period of time for which the letter of credit is providing security. Letters of credit with an expiration date shall provide for automatic annual renewal no later than 30 days prior to the expiration date; and
  5. Name Alpina as sole beneficiary.

How are these instruments used?

Banks following BASEL or Dodd-Frank requirements will classify their issued or confirmed SBLCs as supporting either a “financial” or a “performance” obligation. These two classifications are defined as:

  • “Financial” SbLCs are issued to back financial obligation or some form of indebtedness and irrevocably obligate the Issuer
  • “Performance” SbLCs are issued by Alpina to back performance related duties. These are contractual obligations.

Let's work together!

The advantages of obtaining a financial guarantee (used as assurance, compared with insurance products) either issued, confirmed or “avalized” by a bank, far outweigh the effort and any associated costs. Funding is not only more flexible but also much more reliable and predictable, with faster-than-average closings (10 days or less), and available at more generous terms.

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