The Loan Against Letter of Credit agreement is a specialized financing document used when a company requires funding against an existing Letter of Credit, typically in international trade scenarios. This type of financing is common in South Africa's import/export industry, where companies need working capital between shipping goods and receiving payment. The document complies with South African banking regulations, exchange control requirements, and international trade laws, providing detailed terms for the loan facility, including the loan amount (usually a percentage of the Letter of Credit value), interest rates, repayment terms, and security arrangements. It's particularly useful for businesses engaged in international trade who want to optimize their working capital cycle and manage cash flow effectively while ensuring compliance with local and international banking practices.
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1. Parties: Identification of the lender and borrower with full legal names and registration details
2. Background: Context of the transaction, including reference to the Letter of Credit and underlying trade transaction
3. Definitions: Definitions of key terms used throughout the agreement, including banking, Letter of Credit, and loan-specific terminology
4. Letter of Credit Details: Specific details of the Letter of Credit including issuing bank, beneficiary, amount, and validity
5. Loan Facility: Terms of the loan including amount, percentage of Letter of Credit value being financed, and purpose
6. Interest and Fees: Interest rate, calculation method, fees, and charges applicable to the loan
7. Disbursement: Conditions and process for disbursement of the loan amount
8. Repayment Terms: Repayment schedule, method, and currency of repayment
9. Representations and Warranties: Standard and transaction-specific representations and warranties by the borrower
10. Covenants: Positive and negative covenants applicable to the borrower
11. Events of Default: Circumstances constituting default and consequences thereof
12. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes
13. Notices: Process and addresses for formal communications between parties
14. Execution: Signature blocks and execution formalities
1. Security Arrangements: Include when additional security beyond the Letter of Credit is required
2. Guarantees: Include when personal or corporate guarantees are part of the transaction
3. Insurance: Include when specific insurance requirements are imposed on the underlying goods
4. Assignment: Include when either party needs the right to assign their rights or obligations
5. Syndication: Include when the loan may be syndicated to other lenders
6. Force Majeure: Include when specific force majeure provisions are required beyond standard contract law
7. Sanctions and Compliance: Include when international trade sanctions might be relevant to the transaction
1. Letter of Credit: Copy of the Letter of Credit
2. Disbursement Schedule: Detailed breakdown of loan disbursement timing and conditions
3. Fee Schedule: Detailed breakdown of all applicable fees and charges
4. Security Documents: Copies or forms of any security documents
5. Conditions Precedent: Detailed list of all conditions to be satisfied before loan disbursement
6. Required Documents: List of all documents required for drawdown and monitoring
7. Compliance Certificates: Forms of compliance certificates to be provided by borrower
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Wholesale and Distribution
Commodities Trading
Retail
Agriculture
Mining
Energy
Logistics and Supply Chain
Relevant Teams
Legal
Finance
Treasury
Trade Operations
Risk Management
Compliance
Commercial Operations
Credit
International Trade
Supply Chain
Relevant Roles
Chief Financial Officer
Treasury Manager
Trade Finance Manager
Financial Controller
Import/Export Manager
Legal Counsel
Compliance Officer
Risk Manager
Banking Relationship Manager
Credit Manager
Commercial Director
Supply Chain Manager
Finance Director
Company Secretary
Trade Operations Manager
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