Asian companies are freeing up much-needed capital by switching to surety bonds from bank guarantees, according to insurance broker and risk adviser Marsh.
The move is in response to banks withdrawing credit lines from some clients who they no longer feel comfortable lending to. When banks are not pulling the lines, they are increasing the cost of credit to customers in Asia.
Where they have the possibility of withdrawing from long-term financing commitments, banks are now exercising their right to do so. Many banks have a material adverse change clause in their financing agreements that gives them an option out if circumstances alter dramatically.
“The credit crisis is forcing companies to come up with alternative...