This is de-facto an equivalent of WCF with one exception that usual forms of utilizations (Overdraft and ST-Advances) are further enhanced by another Product type like Bank Guarantees and Bonds, which may be used for various purposes as follows:

• Rental Guarantees, to cover the required deposit from Lessor of rented premises
• Payment Guarantees, to substitute the obligation of Borrower to pay certain amount under specified conditions
• Bid Bonds, to substitute deposit required for participation in Bid Auctions, very much typical for construction companies and developers who attend the public tenders
• Performance Bonds, to secure the penalty-fees payment in case of any failure on project that was not delivered on time resp. in required quality
• Warranty Bonds, to cover the penalty-fees payment connected with inadequate quality on delivered Project/ Goods, so that any damage costs were claimed by Beneficiary
• Customs Guarantees, to cover the potential payment called under Customs regime for imported/ exported Goods or Commodities
• And others.

Such MPL facility may have also regulated feature as WCF according to Borrowing-base (so that limit amount is floating) or can be contractually concluded upfront for a fix amount. In such latter case it is usually supported by parent Company guarantee, that serves as main risk mitigating factor.

Usual documentation type to be signed with Client:

• Loan agreement on MPL facility (utilized in Overdraft, ST-Advances or Bank Guarantees)
• Agreement on pledge of trade Receivables (optional)
• Parent company guarantee/ Letter of comfort (depending on negotiation power of Borrower).

The main difference between Parent guarantee and Letter of Comfort (LoC) is that while guarantee is fully recognized in parent entity accountings as valid commitment, the LoC is often considered only as support which is not legally valid and enforceable at Court settlement. However, on the other hand, if any entity was not fulfilling its obligation under LoC that would represent serious reputation damage and it would definitely harm the banking relations. Also the wording of guarantee is much stronger then LoC, as it says that Guarantor is obliged to remit all outstanding Debts without any stipulations based on first demand, immediately and without any conditions. On the contrary, by issuing LoC the parent entity wants to assure the Creditors that it will keep its subsidiaries in proper financial standing to be able to meet their Debts and obligations.

Further, such MPL Facility is usually tailored to service complete Borrowers financing needs, so that there is also strong interest on Borrowers side to have it in place as to keep unrestricted access to external financing. Reflecting this need, the Creditor and Borrower may agree that MPL facility will have committed nature and fix maturity date (e.g. 3Y from signing date). This means that Bank does not have possibility to withdraw from providing funding (unless serious breach resp. Default is triggered), which is most crucial for operating activities of Borrower. Under the uncommitted facility, the Bank may cancel it without any specific reasons (these are usually General Purposes or WCF contracts).

Set of financial covenants applicable for MPL facility may be nearly the same as in case of WCF, in addition there may be some covenants imposed on Guarantor as well.