A Cash Collateralized Letter of Credit is commonly used in international trade and financial transactions where the issuing bank requires full cash security against its potential liability under the letter of credit. This document, governed by Danish law, is particularly relevant when the applicant's creditworthiness or relationship with the bank necessitates full cash backing, or when regulatory requirements or risk management policies demand cash collateral. The agreement covers the establishment and maintenance of the cash collateral account, the mechanics of the letter of credit, drawing conditions, and the rights and obligations of all parties. It incorporates relevant Danish banking and financial regulations, contract law, and international banking practices, providing a comprehensive framework for securing and operating the letter of credit facility.
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Key Requirements PROMPT example:
Cash Collateralized Letter Of Credit
I need a Cash Collateralized Letter of Credit agreement under Danish law for an export transaction worth EUR 2.5 million, where my company is the beneficiary, and we require the LC to be issued by Danske Bank with 100% cash collateral from the Chinese importer, with the LC expiring on March 15, 2025.
1. Parties: Identification of all parties to the agreement including the issuing bank, applicant, and beneficiary
2. Background: Context of the transaction and purpose of the letter of credit
3. Definitions: Definitions of key terms used throughout the agreement
4. Letter of Credit Terms: Core terms including amount, expiry date, and conditions for drawing
5. Cash Collateral Requirements: Details of the cash collateral amount, maintenance requirements, and top-up obligations
6. Collateral Account: Specifications for the account where cash collateral will be held
7. Security Interest: Creation and perfection of security interest in the cash collateral
8. Drawing Conditions: Specific conditions and documentation required for drawing under the LC
9. Bank's Rights and Obligations: Detailed description of the bank's responsibilities and rights
10. Applicant's Rights and Obligations: Detailed description of the applicant's responsibilities and rights
11. Fees and Expenses: All fees, charges, and expenses related to the LC and collateral
12. Representations and Warranties: Standard representations and warranties from all parties
13. Events of Default: Circumstances constituting default and consequences
14. Termination: Conditions and process for termination of the agreement
15. Governing Law and Jurisdiction: Specification of Danish law as governing law and jurisdiction
1. Foreign Exchange Provisions: Required when LC is issued in a currency different from collateral currency
2. Transfer and Assignment: Include when transfer of LC rights or benefits may be permitted
3. Additional Security: Include when other forms of security are provided in addition to cash
4. Tax Provisions: Required when there are specific tax implications or withholding requirements
5. Electronic Communications: Include when parties agree to use electronic platforms or SWIFT
6. Force Majeure: Optional clause dealing with extraordinary events affecting performance
7. Sanctions Compliance: Include when international trade or parties from different jurisdictions are involved
1. Form of Letter of Credit: Template or actual LC to be issued
2. Fee Schedule: Detailed breakdown of all applicable fees and charges
3. Required Documents: List and format of documents required for LC drawing
4. Drawing Certificate Template: Standard form for beneficiary to request drawing under the LC
5. Bank Account Details: Details of the collateral account and any other relevant accounts
6. Authorized Signatories: List of persons authorized to act on behalf of each party
7. UCP 600 Incorporation: Specific terms of UCP 600 incorporation and any modifications
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Commodities Trading
Shipping and Logistics
Energy
Construction
Wholesale Trade
Retail
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Risk Management
Compliance
Operations
Credit
International Banking
Corporate Banking
Relevant Roles
Trade Finance Manager
Treasury Manager
Chief Financial Officer
Finance Director
Risk Manager
Legal Counsel
Compliance Officer
Banking Relationship Manager
Trade Operations Manager
Credit Manager
Corporate Banking Officer
International Trade Specialist
Documentary Credits Specialist
Financial Controller
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