medium · Debt Capital Markets primary-issuance-syndication
What is 'fronting' in the context of a letter of credit issued under a revolving credit facility?
- An opportunistic investor buys the issuer's senior secured bond moments before a ratings upgrade is announced.
- 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 prepays its full coupon interest obligation for the entire upcoming twelve-month period in advance.
- The lender compels the company to relocate all of its operating cash deposits and treasury management balances over to that bank.
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