This document provides information on standby letters of credit (SBLC), including how they work, who issues them, and how they can be monetized or traded. Key points include: - SBLCs are guarantees of payment issued by banks to ensure payment to exporters if importers are unable to pay. They are issued through both primary transactions between banks and clients, and secondary market transactions between SBLC providers. - SBLCs can be "leased" or "sold" by providers to beneficiaries as an investment, allowing beneficiaries to raise credit, loans, or enter contracts. While not a traditional asset, SBLCs can still be monetized, discounted, or funded to provide cash

1. Standby Letter of Credit (SBLC) is
a guarantee of payment issued by the
importer’s bank, in favor of the exporter, for
an amount agreed at the signing of the
commercial contract. It provides a guarantee to
the exporter that, if due to any circumstances, the
importer is unable to pay, then the bank will make
the payment.
Below is a Standby Letter of Credit (SBLC)
Factsheet You Need To Know!
1. All SBLC/BG are Asset/Cash backed. A newly
created SBLC/BG is called “Fresh Cut” whereas an
already existing SBLC/BG is called “Seasoned”
2. Whether purchased of leased, SBLC / BG is issued
for a “term” having validity normally for 1 year
and 1 day which may extend up to multiple years
depending on the Provider’s own discretion and
Provider’s level of comfort with the Beneficiary.
3.
4. Most banks will issue an SBLC/BG to any of its
customers if they have sufficient (100% of Face
Value of the Instrument) liquidity (cash) in their
bank account or available balance in their credit
line (if they are already availing a credit line from
the bank). It’s a complete myth that “Banks Do
Not Issue SBLC/BG). This direct transaction
between a client and his bank is the “Primary
Market” transaction.
5.

2. 6. Providers of SBLC/BG such as Grand City
Investment Limited generally are a part of the
“Secondary Market” transactions. SBLC/BG
Providers are high net worth corporations or
individuals who hold bank accounts at the issuing
bank that contain significant cash sums (assets).
7.
8. SBLC/BG Providers would often be a collateral
management firm, a hedge fund, or private equity
company. SBLC/BG Provider instructs its issuing
bank to secure and encumber cash in his own
account and authorizes the bank to “cut” (an
industry terms meaning to create a financial
instrument such as SBLC/BG ). Effectively, the
SBLC/BG is “leased” or “sold” to the Beneficiary as
a form of investment since the Provider receives a
return on his commitment.
9.
10. SBLC/BG is issued under ICC/URDG 758 (UPC 600)
protocol and is readily accepted by almost all
International as well as Private Banks.
11. SBLC/BG is issued by the Issuing Bank of the
Provider to the Beneficiary’s bank account at the
Receiving Bank and is transmitted inter-bank via
the appropriate SWIFT platform alone (MT-760).
12.
13. The Provider and the Beneficiary agree to enter
into a Collateral Transfer Agreement (CTA) which
governs the issuance of the SBLC/BG. The
SBLC/BG is specifically issued to the Beneficiary for

3. a defined purpose and each contract is bespoke. It
is effectively a form of “Securities Lending” and
often a derivative of “re-hypothecation”. The fact
that there is an underlying agreement (the CTA)
has no bearing on the wording or construction of
the Guarantee (SBLC/BG). This allows the
Beneficiary to use the SBLC/BG to raise credit, to
guarantee credit lines and loans or to enter trade
positions or buy/sell contracts.
14.
15. SBLC/BG is valuable in the secondary and tertiary
markets, and this also creates an environment for
Intermediaries to profit on the leasing and selling
of SBLC/BG. Unfortunately, this also creates
misunderstandings and opportunities for fraud.
Scammers keep trying, by imposing their
“procedures” which in general, involve rushed
deals with no hard copies to follow, advanced
payments, and so on.
16.
17. By its own nature and definition, only banks can
legally issue SBLC (Stand-By Letters of Credit) or
BG (Bank Guarantee). This is not only common
sense, but actually regulated by banking laws in
most countries since these are debt obligations
issued by banks.
18.
19. SBLC/BG must be UCP-600 compliant and hence it
must be issued by a licensed bank alone.
Otherwise, it will not be UCP-600 compliant,

4. regardless of the wording of the document. If it is
not UCP-600 compliant, no bank will ever accept it
as collateral or even as a documentary credit.
While it is true that URDG-758 changed this from
banks to “a bank, other institution or person” may
act as a guarantor, the fact is that URDG-758 rules
implied that financial stability of the guarantor is
obligatory, and that the issuance of said
documents shall be governed by the internal
legislation of each country. Regardless, most banks
will only accept documentary credit from other
banks, due to their financial stability and their full
compliance with local laws.
20.
21. Banks, in general, will monetize only an
“owned/purchased” SBLC/BG. They will not
monetize a “leased” SBLC/BG. In contrast to a
purchased or owned SBLC where the
buyer becomes the official owner of the instrument
and in turn would be able to lease the SBLC out to
a Third Party, a “leased SBLC” cannot be “leased
out” any further.
22.
23. There are private Monetizers who would monetize
a “leased” SBLC/BG. Some Monetizers will,
however, only accept SBLC/BG with CUSIP or ISIN
Numbers. This means they will NOT accept a fresh
cut bank guarantee, ONLY seasoned instruments.
Seasoned BG’s cost more and generally are only

5. available to be purchased from secondary owners
not banks.
24. Although a leased SBLC/BG is not considered an
“asset” (a leased SBLC/BG is not trading securities,
trading debt instruments, or trading investment
funds.
25.
26. There is no public market for the trading of
SBLC/BG. All SBLC/BG transactions are private
transactions), it can still be monetized, discounted
or funded (whereby the SBLC/BG is turned into
usable cash) by a resourceful Monetizer.
Remember, SBLC/BG is after all a written
obligation of the issuing bank to pay a sum on to a
beneficiary on behalf of their customer in the event
that the customer himself does not pay the
beneficiary.
27.
28. The Instrument/ Security remains valid during the
term before the Expiry Date. Such resourceful
Monetizers possess the capacity to a draw a line of
credit against “leased” SBLC/BG and use part of
the cash to pay the client his “Non Recourse
Monetization Payment” (often 40% to 65% of the
value of the Leased Bank Instrument known as
“Loan To Value” (LTV).
29.
30. The Monetizer then takes the balance of the money
from the Line of Credit and places these funds into
Trade / PPP using a proprietary trading platform.

6. This platform is often a group of experienced bank
traders who use the Monetizers cash and trade it
generating significant profit returns on a weekly or
monthly basis. Often the Platform uses normal
trading risk protection strategies to ensure the
Monetizers funds receive significant protection
from all trading downside risk.
31.
32. Most people often confuse the term NOT RATED
with the fact that some SBLC/BG issuing entities
are not real banks, but private companies offering
consulting services, and sometimes, issuing
documents that are beyond their legal and financial
capacity, hiding themselves behind the excuse that
because they are an “offshore bank” or a foreign
corporation or because they only deal with
foreigners, they do not need to hold a banking
license or comply with reserve deposits with the
Central Banks of the jurisdictions from where they
operate. The reality is, a rating is just an opinion
given by one person or company, about the
credibility of the bank or institution what the rating
is about; but this has almost nothing to do with the
truth, that the documents in question are
worthless not because of the credit rating of the
issuer, but because the issuer is not a bank.
33.
34. For political reasons, most Eurozone regulated
banks avoid, as much as they can, to work with
banks of certain countries. Trying to monetize an

7. instrument issued by a Latin American country, or
even China is almost impossible!!
35. Even Europe is not free of that problem; for
example, while the list of embargo banks from
Russia and Ukraine is very small, most Eurozone
regulated banks prefer to not accept as collateral
instruments issued by any Russian or
Ukraine based banks, they say it is to reduce their
risks as much as possible, and to avoid working
with banks that while not currently on the embargo
list, can be included in said list at any time.
36.
37. Some other countries have strong, reliable and
highly praised banks with excellent credit ratings,
like Azerbaijan, yet almost no Eurozone regulated
bank wants to work with instruments issued by
them; this limits the ability of most monetizers to
work with instruments from banks of these
countries regardless of the credit rating of the
bank.
38.
39. To determine if a borrower is worthy of an
SBLC/BG, many banks will undertake a credit
analysis. Credit analyses focus on the ability of the
organization to meet its debt obligations, focusing
on default risk. Lenders will generally work through
the five C’s to determine credit risk: the applicant’s
credit history, capacity to repay, its’ capital, the
loan’s conditions, and associated collateral.
40.

8. 41. This form of due diligence can revolve around
liquidity and solvency ratios. Liquidity measures
the ease with which an individual or company can
meet its financial obligations with the current
assets available to them, while solvency measures
its ability to repay long-term debts. Specific
liquidity ratios a credit analyst may use to
determine short-term vitality are current ratio,
quick ratio or acid test, and cash ratio. Solvency
ratios might entail the interest coverage ratio.
42.
43. SBLC/BG denotes an irrevocable obligations
assumed by banks. The principle that if a
compliant demand is made under a standby letter
of credit, an issuing bank must pay, subject to only
very limited exceptions.
44. A key purpose of the widespread use of standby
letters of credit to finance commodity transactions
is the comfort it gives to the seller that it will
receive payment.
45.
46. The drafting of the SBLC/BG should provide that
the presentation of a demand would be conclusive
evidence that the amount claimed was “due and
owing” to the Beneficiary of the SBLC/BG. The
beneficiary’s belief that payment was “due and
owing” should activate payment.
47.

9. 48. The meaning of the words “obligated to pay” has
to be considered in the context of the certificate to
be tendered under the SBLC/BG.
49. Exceptions to the rule that an issuing bank must
pay under an SBLC/BG are limited and difficult to
prove. If you have concerns about the reliability of
your counterparty, requiring them to provide an
SBLC from a reliable bank and governed
particularly by English law remains a good way of
securing payment.
50.
51. If you are the beneficiary of an SBLC/BG, you
should insist that it contains clear wording to the
effect that presentation of a demand by you will be
conclusive evidence that the amount claimed will
be “due and owing”. In order to rely on the
strength of these decisions, you should also ensure
that English law governs the SBLC/BG, even if it
does not govern the underlying contract.
52.
53. The great utility of the standby letter of credit is
reflected in the fact that it can be used in
practically any situation in which one party to a
contract is concerned with the other party’s ability
to perform. Some of the many ways in which a
standby letter of credit can be used are: to ensure
payment or performance in construction financing,
corporate consolidations, real estate transactions,

10. management contracts, leases on real and
personal property, stock transfers and purchases,
and bid and performance bonds; to ensure
payment of salaries to highly paid individuals such
as professional athletes and entertainers; and to
ensure payment of professional services such as
attorney’s fees.
54.
55. The standby letter of credit is neither a contract
nor a negotiable instrument and if it is not properly
drafted, it will not be considered a guarantee at all.
The standby letter of credit or SBLC/BG is a
distinct legal instrument, unlike any other. The
obligation of the issuer of the SBLC/BG is
independent of the underlying contract between
the issuer’s customer and the beneficiary of the
SBLC.
56.
57. The standby letter of credit enables a businessman
to enter into business ventures with minimal fear
of loss. By substituting the credit of a third party,
usually a bank, for that of the debtor, the
businessman can help to protect his investment.
Finally, the standby letter of credit is particularly
well suited for preventing loss or delay of payment
caused by the debtor’s bankruptcy.
58.
59. Because the standby letter of credit and its
proceeds are not part of the bankruptcy estate, the
beneficiary of a standby letter of credit should

11. receive payment from the bank without delay. The
low cost and adaptability to a wide range of
business transactions make the standby letter of
credit very attractive to the business community
and to business lawyers.
60.
61. Standby letters of credit frequently involve
negotiated, complex agreements and larger dollar
amounts where lawyers tend to be more involved.
Examples include standbys supporting or securing
municipal bond issues, construction contracts,
subdivision and municipal improvements,
commercial real estate leases, equipment leases,
cable installations, reinsurance requirements of
nonadmitted reinsurers, power purchase contracts,
SWAP agreements, securitizations, self-insured
retention amounts in insurance fronting
arrangements, indemnification obligations for
surety bonds, supersedeas bonds to stay execution
of a judgment pending an appeal, prejudgment
attachments bonds, government contracts or
privileges, clearing obligations of brokers and
dealers, advance payment guarantees, and open
account sales.
62.
63. Commercial letter of credit customs and practice
carry over and are applied to standby letters of
credit because standby letters of credit evolved
from and have many characteristics in common

12. with commercial letters of credit. Commercial letter
of credit customs and practice were established
well before standby letters of credit gained usage
and popularity.
64. Until 1998, when the International Standby
Practices or “ISP”5 was promulgated, almost all
letters of credit were issued subject to the Uniform
Customs and Practice for Documentary Credits (the
UCP).
65. The UCP is specifically geared to examining
documents presented in international trade such as
drafts, bills of lading, other types of shipping
documents, insurance certificates, inspection
certificates, commercial invoices, and packing lists.
The UCP also provides for the “negotiation” of
drafts and documents presented to banks other
than issuers that are “nominated” in letters of
credit to purchase and present the drafts and
documents. Both of these situations—live
commercial documents and negotiation of drafts
and documents—are seldom relevant to or found in
standby letter of credit practice.
66.
67. The UCP governs standby letters of credit to the
extent that its articles are applicable.The UCP does
not explain when and how its articles should be
applied to standby letters of credit.Even preparing
a draft to be presented under a standby letter of
credit can present challenges for those who do not

13. have a working knowledge of how banks expect
drafts to be worded and presented. Yet every
regime that governs letters of credit provides that
standard banking practices or international
standard banking practices are to be used to
determine whether documentary presentations and
other aspects of letter of credit transactions are
proper and compliant.
68.
69. Much of the lack of familiarity with or transparency
of standby letter of credit practices has been
overcome by the International Standby Practices,
or ISP. The ISP’s rules specifically address standby
letters of credit practice separate and apart from
commercial letters of credit practice. The ISP’s
rules are well written and for the most part are
clear, even-handed, and straightforward.
70. They avoid significant pitfalls of using the UCP in
standby letters of credit, such as presentation of
stale documents, installment drawings, force
majeure, and the requirement that documents and
data in documents be consistent. Unfortunately,
the UCP is still used in almost half of the standby
letters of credit issued in this country and probably
in more than half issued by foreign banks in other
countries. Additionally, even the ISP’s rules are not
all-encompassing. Resort to standard banking
practices outside the ISP, caselaw, and the UCC is
necessary to fill in the gaps.

14. 71.
72. Finally, there are several rules or provisions of the
ISP, the UCP or the UCC that govern standby
letters of credit that lawyers and their letter of
credit applicant or beneficiary clients may not be
familiar with, overlook, or miscomprehend their
import. Many letter of credit customs, practices
and rules are counter-intuitive and cannot be
predicted by resort to simple contract law
principles or even other articles of the UCC.

15. Standby Letter of Credit Factsheet – Genuine Bank Instrument Provider, Genuine Bank
Guarantee Provider, Genuine BG/SBLC Providers
At Grand City Investment Limited, all our bank
instruments (BG, CD, LC, BCL, DLC, SBLC) are
issued by top banks and other financial institutions
which includes but not limited to HSBC, Deutsche
Bank, Standard Chartered Bank, Barclays Bank,
Credit Swiss, Union Bank of Switzerland (UBS), as

16. well as other international/multinational Banks in
Europe, United States and Asia.
Our bank instruments are cash backed and can be
used for Discounting, Monetization and Private
Placement Programs (PPP). They also can be used
as collateral against a loan or credit line to secure
Funding for Projects.
If you need a bank instrument, lease bank
guarantee, standby letters of credit, usance l/c, dlc
or any other financial instrument, kindly apply
here or send us an
email: apply@grandcityinvestment.com