easy · Debt Capital Markets
What is 'fronting' in the context of a letter of credit issued under a revolving credit facility?
- An investor buys the senior bond just before it is upgraded.
- One bank issues the LC on behalf of the entire syndicate and fronts the payment to the beneficiary if the LC is drawn.
- The borrower pays the interest for the next year in advance.
- The bank requires the company to move its cash deposits to that bank.
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