The Synthetic Letter of Credit represents an evolution in trade finance instruments, designed to meet contemporary financing needs while maintaining the security of traditional letters of credit. This document is particularly useful when parties require a structured finance solution that combines credit support with funded arrangements. It is governed by Dutch law, which provides a sophisticated legal framework for complex financial instruments and benefits from the Netherlands' position as a major European financial center. The document typically includes detailed provisions for synthetic funding mechanisms, collateral arrangements, and payment structures, making it suitable for large-scale international trade transactions. The Synthetic Letter of Credit is especially relevant in situations where traditional letter of credit structures may not fully meet the parties' financing needs or where additional funding flexibility is required.
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1. Letter Reference and Date: Unique reference number and date of issuance
2. Issuing Bank Details: Complete details of the bank issuing the synthetic letter of credit
3. Beneficiary Details: Full name and address of the beneficiary
4. Applicant Details: Full name and address of the applicant
5. Credit Amount and Currency: Specification of the maximum amount and currency of the synthetic letter of credit
6. Form of Credit: Specification that this is a synthetic/funded letter of credit and its basic structure
7. Availability and Expiry: Terms of when and how the credit is available and its expiry date
8. Payment Terms: Detailed payment mechanisms, including trigger events and settlement process
9. Required Documents: List of documents required for drawing under the synthetic letter of credit
10. Special Conditions: Any special terms or conditions specific to this synthetic structure
11. Governing Law Statement: Clear statement that Dutch law governs the synthetic letter of credit
1. Transfer Provisions: Include when the synthetic letter of credit needs to be transferable
2. Collateral Arrangements: Include when specific collateral is required to support the synthetic structure
3. Credit Default Swap Terms: Include when the synthetic structure involves credit default swap elements
4. Revolving Provisions: Include when the synthetic letter of credit is revolving
5. Syndication Terms: Include when multiple banks are involved in the synthetic structure
6. Force Majeure Provisions: Include when specific force majeure terms are required beyond standard provisions
1. Schedule 1 - Funding Arrangements: Details of the synthetic funding structure and mechanisms
2. Schedule 2 - Form of Drawing Request: Standard format for making drawings under the synthetic letter of credit
3. Schedule 3 - Pricing Schedule: Detailed pricing terms, fees, and calculation methodologies
4. Schedule 4 - Required Documents: Detailed specifications for all required documents
5. Appendix A - Standard Terms and Conditions: General terms and conditions applicable to synthetic letters of credit
6. Appendix B - Collateral Terms: Detailed terms regarding any collateral arrangements
7. Appendix C - Notice Forms: Standard forms for various notices under the synthetic letter of credit
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