ABC Company wants to build a new production site and has to borrow $20 million to continue. If banks find that ABC Company has potential credit defaults, the bank will likely ask XYZ Company to provide financial collateral for the loan. In this way, XYZ Company agrees to repay the loan with funds from other activities – if ABC Company is unable to repay the money itself. A credit guarantee in finance is a promise by a party (the guarantor) to take over a borrower`s debt obligation if that borrower is late. A guarantee may be limited or unlimited, so that the guarantor is only liable for part or all of the debt. In theory, the government is forced to accept risks such as the exchange rate and political risks, as it is better able to deal with them through sound economic policy. However, in practice, the high debt burden on some kind of developing country may increase when the beneficiaries of a guarantee in the host country, in times of economic difficulty, ask the State to keep its promise. Sovereign guarantees are given by host governments to assure project lenders that the government will take certain measures or refrain from taking certain measures with regard to the project. While it is not possible to obtain a comprehensive Crown guarantee for all project risks in a project financing transaction, many of the categories of legal and political risks that typically arise in an infrastructure project will be within the host government`s control and can therefore be fairly attributed to such a host government. In the context of a merger or acquisition transaction, asset sales agreements have a number of advantages and disadvantages compared to the use of an equity (or share purchase) or merger agreement. In the event of a capital acquisition or merger, the buyer receives all the assets of the target entity without exception, but automatically assumes all the liabilities of the targeted entity. In addition, a contract for the sale of assets not only allows for the transfer of part of the assets (which is sometimes desired), but also allows the parties to negotiate the commitments of the objective expressly assumed by the buyer and allows the buyer to leave behind liabilities that he does not want to accept (or of which he knows nothing).
One of the disadvantages of an asset sale contract is that it can often lead to a greater number of change of control issues. For example, contracts held by a target entity and acquired by a buyer often require the counterparty`s agreement as part of an asset agreement, whereas it is less common for such consent to be required in connection with a share sale or merger agreement. Credit guarantees can also be granted for national security reasons to large borrowers to help businesses in critical sectors, or in situations where the failure of a large company will harm the large economy, for example Chrysler Corporation, one of the “big” American automakers, obtained in 1979, in the midst of its near collapse, a guarantee of credit and lobbying of the interests of the work. . . .