Glossary
Letter of Undertaking A substitute for a bill of
exchange or draft usually used in countries
where those instruments attract taxation. By
signing the letter of undertaking, the importer
undertakes to pay the collection amount on
a specific date.
Limited Recourse A lending arrangement
whereby the lender is permitted to request
repayment from the sponsor if the borrower
fails to meet their payment obligation,
provided certain conditions are met.
Generally, limited recourse only applies to a
specific and limited amount.
Liquidated Damages (LDs) Specified amount
that a contractor has to pay if an agreed
performance is not met.
Maintenance Bond A bond supplying funds for
the maintenance of equipment or property.
Maintenance Reserve Account The reserve
account of cash balances set aside to
cover a project’s maintenance and repair
expenses.
Master Lease An umbrella agreement allowing
the lessee to add further assets to the
existing lease agreement simply by entering
a description of the respective equipment
into a supplementary lease schedule. The
new schedule is subject to the original terms
and conditions of the master lease.
Monoline Insurance Credit insurance provided
to lenders or bondholders for a project
company’s debt.
Negative Pledge A covenant whereby a
borrower undertakes not to allow the creation
or subsistence of secured debt or, if the
borrower has the right to issue secured debt
in the future, not to secure such new debt
without offering the same security equally (i.e.
pari passu). Negative pledges are normally
subject to numerous exceptions.
Negotiating Bank A bank assigned in a letter of
credit to give value to the beneficiary against
presentation of documents.
Negotiation Credit Under a negotiation credit,
the exporter receives a credit from the
authorised negotiating bank on presentation
of the stipulated documents and, where
applicable, a draft. If the negotiating bank
has not confirmed the credit, it has the right
to seek recourse from the exporter if cover is
not forthcoming.
Negotiable Instrument A title document whichcan be freely transferred, such as a bill of
exchange.
Negotiated Procedure A tendering procedure
permitting the procuring authority to
negotiate detailed pricing and other terms
with prospective contractors.
Net Lease A lease in which the lessee has to
insure the leased asset and is responsible
for its maintenance as these services are not
provided for in the lease agreement.
Nominated Bank A bank designated by the
issuing bank of a letter of credit which is
authorised to pay; to accept draft(s); to
incur a deferred payment undertaking; or to
negotiate the letter of credit (L/C).
Non-full Payout Lease In contrast to a full
payout lease, the cash flows earned from
this type of lease do not cover the various
costs of the lessor, such as acquisition,
financing and administration costs. In such
a case the lessor relies on its ability to
anticipate accurately the residual value of
the equipment to make its profit (or it will
rely on a guaranteed buy-back, e.g. from the
original supplier).
Non-recourse Factoring The sale or transfer
of title of a company’s accounts receivable
to a third party (factor) where the latter is
not permitted to request repayment from
the seller if the debtor fails to meet their
payment obligation.
Non-recourse A lending arrangement where
the lender is not permitted to request
repayment from the parent company if the
borrower (its subsidiary) fails to meet their
payment obligation, or in which repayment is
limited to a specific source of funds.
Notify Party The name and address of the
party to be notified when commodities or
goods arrive at their destination.
O&M (Operations and Maintenance)
Agreement The contract for operating and
maintaining a project.
Open Account Under an open account
sale, goods/services and accompanying
documents are supplied to the buyer with
payment due at a later date (however
generally no more than 180 days after the
invoice date) without the existence of a
formal debt instrument.
Open-end Lease The opposite of the closed-
end lease: a lease agreement that offers