What is a Direct Pay Letter of Credit?
“Direct Pay Letters of Credit” are hybrid financial vehicles that are typically associated with taxable or tax exempt bond financed projects. These letters of credit allow the applicant to utilize the credit rating of the issuing bank as well as actually make payments to the trustee responsible to bondholders. In structures that utilize Direct Pay Letters of Credit, the letter of credit may be drawn upon by the fiduciary – such as a bond trustee – without first relying on funds provided by our client. The Direct Pay Letter of Credit will be issued by one of the top 25 United States financial institutions, and is fully lienable, collateralizable, callable, transferable and assignable.
