Have we assessed the creditworthiness of the guarantor and the client relationship impact both now and in the event that we have to claim?
Have we considered the impact of all the guarantees issued on the creditworthiness of the guarantor?
Individual Guarantors
The integrity and net worth of the individual is crucial
Don’t be surprised if the individual’s ‘worth’ has disappeared if & when you claim! Check the correlation of risk between the principal and the guarantor’s wealth
Is the guarantor exposed to undue influence from the beneficiary?
Individuals are the most likely guarantors to try to ‘wriggle’ if a claim is made; it is essential to ensure the individual has been given independent legal advice (Refer Tool K3)
Corporate Guarantors
The financial standing and integrity of the corporate will impact the success of any claim, as will the proper execution of the guarantee
Will the additional guarantee be captured as debt in the guarantor’s financial covenants?
If the issuer is a holding company, you also face holding company risk (Refer Tool F)
If the issuer is a daughter company, corporate benefit is a key issue (Refer Tool K3)
If the guarantor has given other guarantees, your position will be diluted
Bank Guarantors
Consider the integrity and standing of the bank
As issuing guarantees is in the normal course of business for banks, legal capacity and execution should not be a problem
Ensure the signatories to the guarantee have the power to legally bind the issuing bank
For developing countries is sovereign approval required to issue and / or pay out foreign currency under the guarantee? (see Sovereign below)
Sovereign Guarantors
Consider the integrity and standing of the country
Check purpose is consistent with any current IMF condition
Check there is adequate country limit availability
Be clear who is actually giving the guarantee (Ministry, Government Department, Agency etc.) and the legal standing & creditworthiness of that party
Ensure the signatories to the guarantee have the power to legally bind the sovereign
