standby underwriting

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.

standby underwriting

An agreement by underwriters to purchase the portion of a new securities issue that remains after the public offering. Standby underwriting eliminates the issuer's risk of not selling the issue out, but it increases the investment bankers' risk.
References in periodicals archive ?
The Lonmin Chairman Roger Phillimore stated via a written statement, "With the standby underwriting and amended debt facilities signed we have taken two decisive steps on our way to delivering that and we are confident about our financial security.
First I address the standby underwriting paradox described by Hansen (1989): the question of why issuing firms do not hire an underwriter on a standby basis and then set a low subscription price so that the underwriter is not required to take up shares, thus keeping costs low.
75 million of its pro-rata subscription rights by applying the fee due it for the original standby underwriting fee and will pay cash for the remainder of its pro-rata rights.
For two years from the date of the shareholders agreement, Globopar and Telmex, subject to their respective fiduciary duties, upon Telmex's request, may approve future issuances of preferred shares in public offerings with pricing to be established through bookbuilding, and Telmex would agree to provide a standby underwriting commitment to purchase such preferred shares at a price of not less than R$0.
Legalistic Style Plain English In the event of default by an If an underwriter defaults, the underwriter, the standby standby underwriting agreement underwriting agreement provides generally allows the non-defaulting that, with minor exceptions, underwriter to increase its purchase purchase commitments of the commitments or terminate the non-defaulting underwriter may agreement.
35 per share, and Telmex will grant a standby underwriting guarantee for subscription, at the minimum issue price of R$0.
Legalistic Style Plain English In the event of a default by If an underwriter defaults, an underwriter, the standby the standby underwriting underwriting agreement agreement generally allows the provides that, with minor non-defaulting underwriter to exceptions, purchase increase its purchase commitments of the commitments or terminate non-defaulting underwriter the agreement.
14, 2000, the effectiveness of the company's Registration Statement which has been filed with the Securities and Exchange Commission, and the company's entering into a definitive standby underwriting agreement with MDB Capital Group LLC for up to 15 million unsubscribed shares in the rights offering.
Unisys has entered into a standby underwriting agreement with an investment banker to help ensure that the conversion will be completed without significant use of company cash.
14, 2000, the effectiveness of the Company's Registration Statement and the Company's entering into a definitive standby underwriting agreement with MDB Capital Group LLC for up to 15 million unsubscribed shares in the rights offering.
Formal notice of redemption will be given by the Company to holders of the debentures upon the filing with the Securities and Exchange Commission and effectiveness of a registration statement in connection with a related standby underwriting arrangement.
14, 2000, the effectiveness of the company's registration statement which it anticipates filing with the Securities and Exchange Commission shortly and the company's entering into a definitive standby underwriting agreement with MDB Capital Group LLC for up to 15 million unsubscribed shares in the rights offering.