• Stonebridge Technologies: A Sequel to Mayan Networks
  • December 20, 2005 | Authors: George A. Hisert; Randy Michelson; Edwin E. Smith
  • Law Firms: Bingham McCutchen LLP - San Francisco Office ; Bingham McCutchen LLP - Boston Office
  • The underlying scenario is a common one. Landlord and tenant enter into a long term lease. Landlord wishes security to cover tenant's potential defaults. Often all or part of that security takes the form of a standby letter of credit. The issuer's reimbursement rights against the tenant/applicant may be secured or unsecured depending upon the issuer's assessment of the tenant's credit. If the tenant's credit is mediocre, it is common for the issuer's reimbursement rights against the tenant to be fully secured. The issuer expects that, if the tenant files for bankruptcy and defaults on its lease obligations, the landlord will draw under the letter of credit and, if the issuer is not promptly reimbursed by the tenant for the amount of the draw, the issuer will foreclose on its collateral to obtain reimbursement.