What is a Backup Line?
How Does a Backup Line Work?
For example, let’s assume Company XYZ wants to issue $10 million in . The matures in 30 days, and there is no collateral involved; that is, the is unsecured. To protect investors from default, Company XYZ asks its bank to provide a backup line. For a fee from Company XYZ, the bank agrees to repay the investors if for any reason Company XYZ cannot. Banks can provide backup lines for all or a portion of a issue, depending on the creditworthiness of the .