Sponsor Support Agreement Meaning

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Admittedly, all this is a personal guarantee in disguise and a distortion of the purpose of the aid to sponsors. A prudent and well-advised sponsor should not let this pass. Banks consider a lack of liquidity or cost overrun as a “drawtop” event, which means that the borrower of the project company cannot draw funds from the loan until the situation is resolved. The Bank then communicates to the sponsor a specified amount of aid needed to cover the deficit and asks it to discuss whether it should do so through borrowing or equity: a subordinated loan or a capital increase. Once a joint decision has been taken, the Bank`s sponsor confirms in writing the agreed financing method and must implement it within one month. Here`s the tricky part. Sometimes banks go even further, forgetting that this is only a temporary support to sponsors and not a permanent personal guarantee. They extend the cash waiting period that the promoter must cover, beyond the closing date of the project, until the date of full repayment of the loan. One month is allowed because the notification of a capital increase to the Companies Registry Office usually takes three weeks. A similar timeline is convenient for the sponsor to find ways to finance their own credit facility. The only objective of sponsorship support is therefore the completion of construction. In addition, the proceeds of the project play a decisive role in the place of the sponsor.

With regard to international project financing, the liability of the promoter or promoter is limited. The final shareholders and individual shareholders of the project company must make available, in addition to syndicated bank loans, their own personal financial resources, in order to ensure that the project is completed in a timely manner. This is called limited recourse funding. Non-financial equity support resulting from the experience, knowledge and technical expertise of the promoter, in particular by: there are differences between a sponsorship contract and a personal guarantee. The developer`s assistance is to ensure that construction continues until its completion on time, passing through financial difficulties. Sponsor support is shorter and ends with the completion of the project. A personal guarantee ensures that lenders are reimbursed with or without completion of the project. In the case of a temporary loan, this guarantee is guaranteed for the long term of the facility, as long as the project company still owes money to the banks. The guarantee will only end when each baht is refunded.

Assistance in obtaining licences, authorisations and administrative authorisations (in particular in the case of a local sponsor) and credit facilities granted by banks may include a guarantee guarantee under which the bank provides a guarantee to a foreign supplier of the borrower. When the supplier requests the bank guarantee, the issuing bank avoids putting the money out of its pocket, but requires the borrower to provide the amount of the call to the bank to transmit it to the supplier. Banks that are aware of the sponsor`s assets sometimes bypass the borrower and contact the sponsor to pay the money from the conversation to the issuing bank. Clearly, the banks say that if the borrower of the project company does not have enough cash to repay the loan and interest at any time during the term of the loan – say five to seven years, even during the operating term long after the end of the project – the sponsor must stand up and help make the payment … . .

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