> ## Content Index > Fetch the complete content index at: https://blog.financely.io/llms.txt > Use this file to discover other available public pages before exploring further. # 5 Real Standby Letter of Credit Transactions - URL: https://blog.financely.io/5-real-standby-letter-of-credit-transactions/ - Published: 2026-09-14T12:42:52.000Z - Updated: 2026-09-14T12:42:52.000Z - Description: See five real transactions where standby letters of credit secured commodity purchases, supply commitments, PPAs, leases and M&A obligations. - Author: Financely Debt Advisors Standby Letter of Credit ## 5 Real Transactions That Used Standby Letters of Credit Standby letters of credit are used across far more than international commodity trading. They can secure acquisition payments, power purchase agreements, construction obligations, commercial leases and even reserves within a project finance structure. The instrument usually sits behind a separate commercial obligation. The applicant is expected to perform or pay under the underlying agreement. The beneficiary turns to the standby when one of the draw conditions specified in the instrument occurs. That makes real transactions much more useful than hypothetical explanations. The five transactions below are publicly documented examples from 2020 through 2023 showing exactly what the SBLC was supporting and why the beneficiary required it. **The important point:**the SBLC is not the transaction. It is the credit support behind the transaction. A credible requirement starts with an identifiable contract, applicant, beneficiary, exposure, tenor and event against which the beneficiary requires protection. ![Container ships and cranes at a busy international cargo port](https://images.unsplash.com/photo-1769776297263-27b09268b126?auto=format&fit=crop&w=1600&q=82) Standby letters of credit support payment and performance obligations across trade, infrastructure, energy, property and corporate transactions. ## Five Real SBLC Transactions at a Glance | Transaction | SBLC Use | Amount | Risk Supported | | ------------------------------------------ | --------------------------------------- | ---------------------------- | --------------------------------------------------------------------------------------- | | Lawson Products acquisition of Partsmaster | Deferred acquisition payment | US$33 million | Seller risk that the deferred portion of the purchase price would not be paid when due. | | SE Aragorn / Austin Energy PPA | Power purchase agreement credit support | US$22.5 million | Contractual payment and default exposure under the renewable-energy PPA. | | Rio Grande LNG / Bechtel EPC | Contractor performance security | Percentage of contract price | EPC performance, delay, completion and other contractor obligations. | | PTC Therapeutics commercial lease | Lease security | US$8.14 million | Tenant obligations and amounts owing to the landlord under the lease. | | FuelCell Energy Opco financing | Debt service reserve | US$6.5 million | Liquidity support within a project finance structure. | M&A Deferred Purchase Price US$33 Million ## 1\. Lawson Products Used a US$33 Million SBLC in the Partsmaster Acquisition In August 2020, Lawson Products acquired Partsmaster from NCH Corporation. Partsmaster was an MRO products business serving approximately 16,000 customers across the United States and Canada. The [Partsmaster asset purchase agreement ](https://www.sec.gov/Archives/edgar/data/703604/000110465920101889/tm2029918d1%5Fex2-1.htm?ref=blog.financely.io)had a total purchase price of approximately US$35.3 million plus the assumption of certain liabilities. Lawson paid approximately US$2.3 million at closing. The remaining US$33 million was payable in May 2021\. Rather than leave NCH exposed to Lawson's unsecured promise to make that later payment, the purchase agreement included a US$33 million irrevocable standby letter of credit supporting the deferred acquisition liability. Lawson subsequently disclosed that the [US$33 million SBLC was released after the acquisition liability was paid ](https://www.sec.gov/Archives/edgar/data/703604/000070360422000019/laws-20211231.htm?ref=blog.financely.io)in May 2021\. **Applicant** Lawson Products **Protected Party** NCH Corporation / sellers **Commercial Purpose** Security for deferred acquisition consideration. **Why the SBLC made sense:**Lawson could close the acquisition without paying the entire purchase price immediately, while the seller received bank-backed protection for the US$33 million payment due several months later. Renewable Energy Power Purchase Agreement US$22.5 Million ## 2\. SB Energy Used a US$22.5 Million SBLC for an Austin Energy PPA Power purchase agreements create long-dated obligations between project companies and electricity buyers. Those obligations frequently require independent credit support. In a publicly filed financing agreement, CoBank established an [US$22.5 million irrevocable transferable standby letter of credit ](https://www.sec.gov/Archives/edgar/data/2133037/000162828026059639/exhibit1015-creditagreemen.htm?ref=blog.financely.io)for SE Aragorn, LLC, an SB Energy project company, in favor of the City of Austin doing business as Austin Energy. The standby related directly to the project's power purchase agreement with Austin Energy. The PPA dated from December 2017 and had subsequently been amended, including through a 2020 letter agreement. The standby permitted Austin Energy to draw in circumstances allowed by the underlying PPA, including specified defaults and amounts due and unpaid by the project company. **Applicant** SE Aragorn, LLC / SB Energy **Beneficiary** City of Austin d/b/a Austin Energy **Issuing Bank** CoBank, ACB **Why the SBLC made sense:**Austin Energy was entering into a long-term commercial relationship with a project special-purpose vehicle. The standby added bank credit behind specified obligations of the project company under the PPA. LNG EPC Performance Security ## 3\. Bechtel Was Required to Provide an SBLC on the Rio Grande LNG EPC Contract Standby letters of credit can also secure the contractor side of a major infrastructure transaction. In September 2022, Rio Grande LNG, LLC and Bechtel Energy Inc. entered into an amended and restated fixed-price turnkey agreement for the engineering, procurement and construction of Trains 1 and 2 of the [Rio Grande natural gas liquefaction facility ](https://www.sec.gov/Archives/edgar/data/1612720/000143774922026905/ex%5F439451.htm?ref=blog.financely.io). The EPC agreement required Bechtel, as contractor, to provide Rio Grande LNG, as owner, with an irrevocable standby letter of credit issued or confirmed by an investment-grade commercial bank in the United States. The face amount was calculated as a percentage of the EPC contract price. The precise percentages are redacted in the public filing. The required SBLC amount could also increase when qualifying change orders increased the contract price. The instrument then stepped down as specified construction and performance milestones were achieved. **Applicant** Bechtel Energy Inc. **Beneficiary** Rio Grande LNG, LLC **Commercial Purpose** EPC contractor performance security. **Why the SBLC made sense:**the owner was making substantial payments under a major fixed-price EPC contract before the liquefaction trains were complete. The standby provided liquid bank-backed security behind specified contractor obligations and reduced as construction risk declined. Commercial Real Estate Lease Security US$8.14 Million ## 4\. PTC Therapeutics Used an US$8.14 Million SBLC Instead of Relying on Cash Alone A standby letter of credit can give a commercial landlord substantial security without requiring the tenant to transfer the same amount directly to the landlord as a conventional cash deposit. On June 22, 2022, HSBC Bank USA issued an [US$8,138,655 irrevocable standby letter of credit for PTC Therapeutics ](https://contracts.justia.com/companies/ptc-therapeutics-inc-1910/contract/248438/?ref=blog.financely.io)in favor of Warren CC Acquisitions LLC. Warren CC Acquisitions was the landlord and PTC Therapeutics the tenant. The standby supported amounts due and owing under the lease. The instrument permitted partial and multiple drawings and was structured for automatic annual renewal unless HSBC gave advance notice that it would not extend. It also protected the landlord against a situation in which the bank elected not to renew and the tenant failed to provide an acceptable replacement standby. **Applicant** PTC Therapeutics Inc. **Beneficiary** Warren CC Acquisitions LLC **Issuing Bank** HSBC Bank USA, N.A. **Why the SBLC made sense:**the landlord obtained a bank undertaking supporting the tenant's lease obligations, while the tenant could structure its security through its banking relationship instead of simply transferring more than US$8 million to the landlord. Project Finance Debt Service Reserve US$6.5 Million ## 5\. FuelCell Energy Used a US$6.5 Million SBLC as a Debt Service Reserve Not every standby protects a supplier, landlord or offtaker. An SBLC can also provide liquidity support directly inside a financing structure. In May 2023, FuelCell Energy Opco Finance 1, LLC entered into a financing arrangement with Investec Bank. The documentation included a [US$6.5 million debt service reserve standby letter of credit ](https://www.sec.gov/Archives/edgar/data/886128/000110465923064371/tm2316597d1%5Fex10-1.htm?ref=blog.financely.io)issued in favor of Investec Bank plc as collateral agent. The instrument was identified specifically as the form of DSR Letter of Credit. It therefore performed a role that can otherwise require a project borrower to maintain cash in a funded debt service reserve account. Under the depositary arrangements referenced by the standby, the collateral agent could draw when the conditions for accessing the reserve were satisfied. **Applicant** FuelCell Energy Opco Finance 1, LLC **Beneficiary** Investec Bank plc as Collateral Agent **SBLC Amount** US$6.5 million **Why the SBLC made sense:**a debt service reserve protects lenders against temporary cash-flow shortfalls. Using an acceptable standby can provide that protection without necessarily leaving the entire reserve permanently sitting in cash. ## These Transactions Use the Same Instrument for Different Risks The five examples show why describing an SBLC simply as a "payment guarantee" misses much of its commercial utility. Lawson used one behind deferred M&A consideration. Austin Energy received one behind a power purchase agreement. Rio Grande LNG required one from an EPC contractor. Warren CC Acquisitions held one as lease security. Investec used one as part of a project-finance reserve structure. What changes is the underlying exposure. The fundamental instrument remains an independent undertaking from the issuing bank to honor a complying presentation from the beneficiary. ### Payment Risk The standby can secure money that becomes payable later, as demonstrated by the deferred US$33 million Partsmaster acquisition payment. ### Contract Performance PPAs and EPC agreements can require standby credit when failure to perform can create substantial replacement, delay or termination costs. ### Long-Term Obligations Commercial landlords can use SBLCs to maintain security throughout a multi-year lease without holding an equivalent cash security deposit. ### Financing Liquidity Project lenders can accept an SBLC as part of a reserve structure supporting debt service or another financing obligation. ## The SBLC Normally Sits Behind the Primary Contract In each example, another agreement comes first. There is an asset purchase agreement, a PPA, an EPC agreement, a lease or a financing agreement. Those documents establish who owes what to whom and under which circumstances. The standby then creates a separate undertaking from the issuing bank to the beneficiary. The instrument specifies the face amount, expiry, presentation mechanics and certifications required for a draw. This is why an SBLC request should normally start with the underlying transaction, not with a request to "obtain a US$50 million SBLC." The commercial obligation determines the appropriate amount, wording, tenor and beneficiary. ## Why an SBLC May Be Used Instead of Cash Cash provides excellent security to the beneficiary but can be inefficient for the applicant. A US$10 million cash deposit removes US$10 million from the applicant's available liquidity. An SBLC can allow the commercial counterparty to receive bank-backed credit support while the applicant manages the reimbursement obligation through its banking facilities. The actual liquidity benefit depends on the issuing bank's credit requirements. A bank may issue against an established credit line, cash collateral, marketable securities, other assets or a combination of support. A fully cash-collateralized standby protects the beneficiary but may produce little liquidity benefit for the applicant. An SBLC issued within an established corporate credit facility can have very different economics. ## How the Required Amount Is Determined The real transactions above also show that there is no standard SBLC amount. The face value should correspond to the exposure being secured. In the Partsmaster acquisition, the standby matched the US$33 million deferred purchase-price obligation. In the Austin Energy transaction, the requirement was US$22.5 million under the PPA. In the Rio Grande LNG EPC agreement, the amount was calculated as a percentage of the contract price and reduced as construction milestones were achieved. Lease security may be determined by the landlord's required coverage, while a debt service reserve standby will generally be linked to the reserve requirement imposed under the financing documents. ## What a Bank Will Want to See An issuing bank needs to understand both the applicant and the obligation it is being asked to support. ### Underlying Agreement The purchase agreement, PPA, EPC contract, lease, financing document or other contract establishing the obligation. ### Required SBLC Wording Beneficiary requirements covering amount, expiry, draw statements, governing rules, transferability and renewal mechanics. ### Applicant Financials Financial statements, bank information, liquidity, leverage and reimbursement capacity. ### Collateral Position Cash, securities, assets, existing bank lines or other support available to the issuing institution. ### Counterparties Applicant, beneficiary, owners, project entities and any other material parties to the underlying transaction. ### Transaction Economics Why the instrument is required, how the requested amount was calculated and how long the obligation needs to remain outstanding. ## What Legitimate SBLC Usage Looks Like These transactions share several characteristics. There is a real applicant and a real beneficiary. The parties have an identifiable contractual relationship. The amount is connected to a measurable commercial exposure. The standby has defined draw conditions and a logical expiry. That is materially different from transactions in which an SBLC is presented as a standalone financial product that should first be obtained and then "monetized" without a clearly identifiable underlying obligation. Financely works on [standby letter of credit requirements for eligible commercial transactions ](https://www.financely.io/sblc-provider-standby-letters-of-credit-for-eligible-commercial-transactions?ref=blog.financely.io)where the instrument supports an identifiable payment, performance, project, contractual or collateral obligation. ## Frequently Asked Questions Can an SBLC secure an acquisition payment? Yes. Lawson Products' acquisition of Partsmaster provides a documented example. A US$33 million standby supported the deferred portion of the purchase price until it was paid in May 2021\. Can an SBLC be required under a power purchase agreement? Yes. PPAs commonly require credit support from project companies, offtakers or both. The SE Aragorn and Austin Energy transaction included a US$22.5 million standby supporting obligations under the PPA. Can an EPC contractor provide an SBLC? Yes. The Rio Grande LNG EPC agreement required Bechtel to provide an investment-grade bank standby calculated as a percentage of the contract price. The amount reduced as specified construction and performance milestones were met. Can an SBLC replace a commercial lease security deposit? It can where the landlord accepts that structure. PTC Therapeutics' 2022 standby in favor of Warren CC Acquisitions had a face amount of approximately US$8.14 million. Can an SBLC be used as a debt service reserve? Yes, if the financing documents and lenders permit it. FuelCell Energy Opco Finance 1's 2023 financing included a US$6.5 million debt service reserve standby. Does an SBLC mean no collateral is required? No. The beneficiary's security and the issuing bank's security are different questions. The bank may require cash collateral, securities, other assets, a credit line or another acceptable reimbursement arrangement before issuing. ## Need an SBLC for a Commercial Transaction? Financely works with companies requiring standby letters of credit for eligible trade, acquisition, project, supply, lease and contractual obligations. Submit the underlying agreement, required face amount, tenor, beneficiary requirements and draft wording where available. [Request a Quote ](https://www.financely.io/requestaquote?ref=blog.financely.io) This article is provided for general informational purposes. Publicly filed transactions are referenced solely to illustrate documented commercial uses of standby letters of credit and do not imply any relationship between Financely and the parties named. Financely is not a bank and does not guarantee issuance. Any proposed instrument remains subject to applicant eligibility, creditworthiness, KYC and AML review, sanctions screening, issuer approval, beneficiary acceptance, collateral requirements where applicable and definitive documentation.