Document background
The Synthetic Letter of Credit represents an evolution in trade finance instruments, designed to meet contemporary financing needs while maintaining the security of traditional letters of credit. This document is particularly useful when parties require a structured finance solution that combines credit support with funded arrangements. It is governed by Dutch law, which provides a sophisticated legal framework for complex financial instruments and benefits from the Netherlands' position as a major European financial center. The document typically includes detailed provisions for synthetic funding mechanisms, collateral arrangements, and payment structures, making it suitable for large-scale international trade transactions. The Synthetic Letter of Credit is especially relevant in situations where traditional letter of credit structures may not fully meet the parties' financing needs or where additional funding flexibility is required.
