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 ?
The history shows that the last two standby agreements were signed by the interim governments and the history will be repeated once again.
The Swedish EU Presidency is pressing for improved mechanisms to allow the EU to generate civilian ESDP missions more quickly, including asking the European Commission to draw up standby agreements with suppliers who could rapidly supply missions with specialised kit, ranging from flak jackets to secure communication systems.
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.