Tag: Cash pool guarantees

TPG2022 Chapter X paragraph 10.148

These cross-guarantees and set-off rights are a feature of an arrangement which would not occur between independent parties. Each guarantor is providing a guarantee for all members of the pool but will not have control over membership of the pool, has no control over the quantum of the debt which it is guaranteeing, and may not be able to access information on the parties for whom it is providing a guarantee. With other parties providing guarantees on the same loans, it may not be possible for the guarantor to evaluate its real risk in the event of a default. Thus, the practical result of the cross- guaranteeing arrangement is such that the formal guarantee may represent nothing more than an acknowledgement that it would be detrimental to the interests of the MNE group not to support the performance of the cash pool leader and so, by extension, the borrower. In such circumstances the guaranteed borrower may not be benefitting beyond ... Read more

TPG2022 Chapter X paragraph 10.147

As part of the cash pooling arrangement, cross-guarantees and rights of set-off between participants in the cash pool may be required. This raises the question of whether guarantee fees should be payable. It will always be appropriate to consider the particular facts and circumstances in any situation but there are certain factors which are likely to be common to many cash pools: there will be numerous members of the pool, there may be both entities with debit positions and entities with credit positions in the pool, each pool member may have a different stand-alone credit rating, and the pooling agreement with the bank is likely to require full cross-guarantees and rights of set-off between all pool participants ... Read more

TPG2020 Chapter X paragraph 10.148

These cross-guarantees and set-off rights are a feature of an arrangement which would not occur between independent parties. Each guarantor is providing a guarantee for all members of the pool but will not have control over membership of the pool, has no control over the quantum of the debt which it is guaranteeing, and may not be able to access information on the parties for whom it is providing a guarantee. With other parties providing guarantees on the same loans, it may not be possible for the guarantor to evaluate its real risk in the event of a default. Thus, the practical result of the cross- guaranteeing arrangement is such that the formal guarantee may represent nothing more than an acknowledgement that it would be detrimental to the interests of the MNE group not to support the performance of the cash pool leader and so, by extension, the borrower. In such circumstances the guaranteed borrower may not be benefitting beyond ... Read more

TPG2020 Chapter X paragraph 10.147

As part of the cash pooling arrangement, cross-guarantees and rights of set-off between participants in the cash pool may be required. This raises the question of whether guarantee fees should be payable. It will always be appropriate to consider the particular facts and circumstances in any situation but there are certain factors which are likely to be common to many cash pools: there will be numerous members of the pool, there may be both entities with debit positions and entities with credit positions in the pool, each pool member may have a different stand-alone credit rating, and the pooling agreement with the bank is likely to require full cross-guarantees and rights of set-off between all pool participants ... Read more