The Loan Against LC agreement is a specialized financing document used when a borrower seeks to obtain funding secured by a Letter of Credit. This document type is particularly relevant in Canadian trade finance transactions where businesses require working capital or trade financing backed by LCs. The agreement must comply with Canadian federal banking regulations and provincial secured transactions laws, while also considering international trade practices. It typically includes detailed provisions regarding the LC security structure, drawdown mechanics, monitoring requirements, and enforcement rights. This document is commonly used in import/export transactions, large-scale procurement contracts, and international trade deals where Letters of Credit serve as a secure payment mechanism. The agreement's structure accommodates both domestic Canadian transactions and cross-border arrangements, incorporating necessary provisions for international banking practices and LC regulations.
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1. Parties: Identification of the lender(s), borrower(s), and any guarantors
2. Background: Context of the loan facility and the underlying Letter of Credit
3. Definitions and Interpretation: Defined terms, rules of interpretation, and currency conventions
4. The Facility: Details of the loan amount, purpose, and relationship to the LC
5. Conditions Precedent: Prerequisites for drawdown including LC documentation requirements
6. Drawdown Mechanics: Procedures and requirements for accessing the loan facility
7. Interest and Fees: Interest calculation, payment terms, and applicable fees
8. Repayment and Prepayment: Terms for scheduled repayments and early repayment options
9. Security Arrangements: Details of the LC as security and any additional security requirements
10. Representations and Warranties: Standard and LC-specific representations by the borrower
11. Covenants: Ongoing obligations of the borrower including LC-related requirements
12. Events of Default: Circumstances constituting default and consequences
13. Changes to Parties: Assignment and transfer provisions
14. Administration: Payment mechanics, calculations, and notices
15. Governing Law and Jurisdiction: Choice of law and dispute resolution provisions
1. Syndication Provisions: Required when multiple lenders are involved in the facility
2. Multi-LC Provisions: Used when the facility is secured by multiple Letters of Credit
3. Currency Provisions: Required for cross-border transactions or multiple currency facilities
4. Additional Security Provisions: When security beyond the LC is required
5. Tax Provisions: Detailed tax clauses for cross-border transactions
6. Insurance Requirements: When specific insurance coverage is required for the underlying LC transaction
7. Force Majeure: Extended force majeure provisions for international transactions
8. Increased Costs and Market Disruption: Required for longer-term facilities or volatile markets
1. Letter of Credit Details: Full details of the LC(s) including issuing bank, beneficiary, and terms
2. Form of Drawdown Request: Standard form for requesting drawdown under the facility
3. Conditions Precedent Documents: List of required documents for initial and subsequent drawdowns
4. Fee Schedule: Detailed breakdown of all applicable fees
5. Repayment Schedule: Detailed repayment terms and dates
6. Form of Transfer Certificate: Standard form for transferring interests in the facility
7. Security Documents: Forms of security documents and filing requirements
8. Compliance Certificate: Form for periodic compliance certification
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Wholesale Distribution
Retail
Commodities Trading
Energy
Construction
Agriculture
Mining
Transportation and Logistics
Relevant Teams
Trade Finance
Corporate Banking
Legal
Credit Risk
Treasury
International Banking
Compliance
Documentary Credits
Transaction Banking
Commercial Banking
Trade Operations
Relevant Roles
Trade Finance Manager
Credit Risk Officer
Commercial Banking Manager
Treasury Manager
Chief Financial Officer
Finance Director
Corporate Banking Officer
Trade Operations Manager
Legal Counsel
Compliance Officer
Documentary Credits Manager
International Banking Manager
Relationship Manager
Credit Administrator
Risk Management Officer
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