Backup Line of Credit

A bank assurance of funds obtained by an issuer of commercial paper to protect the CP investor from default. The issuer pays a commitment fee to the bank.

Backup Line of Credit

A bank's guarantee of an issuer's commercial paper. Commercial paper is a short-term, unsecured debt security usually issued by a company with a very high credit rating. As a result, commercial paper is very low-risk. The backup line provides additional security for the paper, but usually does not provide credit for the full value of the paper. The issuer pays a fee to the bank for the backup line.

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Backup line

References in periodicals archive

"Getting paid eight [basis points] for a backup line of credit - that's no way to make a living," moans Shufeldt at SunTrust.

Tough Times/Tougher Banks: Bank consolidation and the recession have made it more difficult for companies to find lenders ready and willing to give them money. (Banking)

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