We have received approval for debt funding, from US based lender "A" for a new project in Africa. They asked for bank guarantee / SBLC as collateral. We approached a leading bank "B" in one of the African country. Although this bank "B" does not have presence in the country where project is being launched, they have approved the guarantee facility. Both the insitutions A & B are reputed and geniune organizations. The lender "A" has no problem in accepting guarantee from bank "B". Hence, we signed subsequent facility agreements with lender "A", and paid loan processing fees. When the draft copy of bank guarantee/SBLC was issued by bank "B" for acceptance by lender "A", lender "A" has following comments:

AS PER ICC RULES, IF APPLICANT IS NOT THE SAME AS BORROWER UNDER AN ICC 500 SBLC, 1993 REVISION, THE SBLC IS NOT ENFORCEABLE. IF A US BASED LENDER PARTICIPATES IN SUCH SCHEME, IT WOULD BE IN VIOLATION OF SARBANIES-OAKLY ACT.

I request somebody to throw some light on above, and help us on how to proceed further.

If you or your clients are in need of a Large Amount of funds for Commercial /Residential projects. (In or outside of the U.S. ) E-mail your scenario, and myself or one of my associates will get back to you with in 24hrs.

My associates specialize in large loans not only in the U.S. but Bahamas, West Indies, Panama and most any countries as long as they are not third world countries.

What they are apparently trying to say is that the Bank who is issuing the Letter of Credit or Bank Guarantee, needs to be the guarantor of the loan. In other words, the funds need to deposited into the bank that is issuing the SBLC, who would in turn allow you to then withdraw the funds from them.

You would basically be receiving the loan from the bank who issued the Guarantee and usually for slightly higher rates and or fees than the original lender. They would obviously want to profit from moving all this money.

Thanks for your response. Let me explain to you the problem. The guaranter bank is issuing SBLC / BG with applicant name as some third party (not our name), because of some regulatory issue in the country in question. The Lender says, if applicant is not same as Borrower under ICC 500 SBLC, 1993 revision, the SBLC is not enforceable. IS IT SO?

Can the applicant be made a coborrower of the facility granted by the US based lender?

Why is the applicant willing to let the letter of credit be used in this manner? What is their consideration?

Applicant is an Asset Management Company. We will be giving charge on Project assets to the applicant, over and above their annual fees.

Applicant will not become co-borrower.