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The Collateral for Letter of Credit agreement is a crucial document in trade finance transactions within the Philippine jurisdiction. It is typically required when a bank issues a letter of credit facility to support international trade transactions, providing the bank with security against the applicant's obligation to reimburse any payments made under the letter of credit. This document becomes necessary when businesses engage in import/export activities requiring letter of credit facilities but need to provide security to obtain them. The agreement must comply with Philippine banking regulations, particularly those issued by the Bangko Sentral ng Pilipinas (BSP), and considers both local security laws and international banking practices. It includes detailed provisions about the collateral, its maintenance, valuation, and enforcement procedures, ensuring the bank's security interest is properly protected under Philippine law.

1. Parties: Identifies the security provider/pledgor, the bank issuing the letter of credit, and any other relevant parties

2. Background: Describes the underlying letter of credit transaction and the purpose of the collateral arrangement

3. Definitions: Defines key terms used throughout the agreement, including specific banking and security-related terminology

4. Grant of Security Interest: Details the creation and nature of the security interest over the collateral

5. Description of Collateral: Specific description and details of the assets being provided as collateral

6. Secured Obligations: Defines the obligations secured by the collateral, including the letter of credit details

7. Representations and Warranties: Security provider's confirmations regarding ownership, authority, and status of collateral

8. Covenants: Ongoing obligations of the security provider regarding maintenance and preservation of collateral

9. Rights and Obligations of the Bank: Bank's rights regarding the collateral and obligations in maintaining it

10. Events of Default: Circumstances that constitute default and trigger enforcement rights

11. Enforcement: Bank's rights and procedures for enforcing security upon default

12. Term and Release: Duration of the security arrangement and conditions for release of collateral

13. Notices: Communication procedures between parties

14. Governing Law and Jurisdiction: Specifies Philippine law as governing law and jurisdiction for disputes