A borrower would not generally be prepared to pay for a guarantee if it did not expect to obtain an appropriate benefit in return. Even an explicit guarantee will not necessarily confer a benefit on the borrower; for example, banking covenants applicable to a parent or other MNE group member’s debt facilities can include the default of another MNE group member as an event that may cause the termination of a facility or other adverse consequences. Other legal, financial or operational ties may mean that it would not be possible to abandon the borrower if it encounters financial difficulty without the MNE group suffering a credit rating downgrade. Any of these circumstances may produce the practical result that MNE group members are financially interdependent quite apart from any formal guarantee arrangement, so that the economic risk of the guarantor may not change materially on it giving an explicit guarantee. In other words, the formal guarantee may represent nothing more than ... Read more