The use of the credit of an entity having greater financial strength than the issuer or borrower to improve the credit quality of a bond issue.
A contract typically seen in transactions that involve a Letter of Credit or a Guaranty. A Reimbursement Agreement sets out the terms of repayment by the Issuer or the Borrower to the bank providing the Letter of Credit of any amounts advanced under the Letter of Credit or to the Guarantor of any amounts advanced under the Guaranty. A Reimbursement Agreement also typically contains financial covenants and other conditions for the Letter of Credit or the Guaranty to remain in effect.
A commitment, usually issued by a commercial bank, used to guarantee payment of the payment of the principal and interest on a bond issue.
A third party’s promise to pay the debt service on the bonds or perform some other obligation, which is the primary obligation of another party.