Standby agreement

(redirected from Standby Agreements)

Standby agreement

In a rights issue, agreement that the underwriter will purchase any stock not purchased by investors.

Standby Agreement

An agreement between the issuer of a security and its underwriters stating that the underwriters are responsible for any unsold portion of the issue. That is, the underwriters agree to buy the remainder of a new issue if they are unable to place its entirety with investors. This transfers the risk of the unsold portion of the issue from the issuer to the underwriters. This guarantees that the issuer will raise the capital it intends to raise, but leaves the underwriters with the possibility that they must purchase an issue with low value. As a result, underwriters charge a standby fee for a standby agreement. It is also called firm commitment underwriting or a backstopped deal.
References in periodicals archive ?
Accounting Treatment under FRS 26 of the Standby Agreements
For example, its off-balance sheet standby agreements have grown 350 percent in 3 years and comprise nearly 50 percent of Farmer Mac's total loans.
The rights are expected to be freely transferable, and the bank expects that the offering will be backed by standby agreements.
This delay has arisen as a result of the additional time required for the Company's auditors to review with the Board the basis upon which the Company's standby agreements with investors, in respect of Redeemable Shares, should be accounted for on the Company's balance sheet.
The Standby Agreements with the standby purchasers provide for the issuance and sale of up to $250 million of bank common stock at the subscription price for the rights offering of $9.
Between 2005 and 2008, PIP entered into the Standby Agreements with a number of institutions ("Standby Investors").
To ensure sale of the RAWs, the state has entered into standby agreements with four institutions under which each agrees to submit bids for the securities.
subscribe for new Redeemable Shares under standby agreements, if called upon by