Document background
A Credit Enhancement Agreement is essential in financial transactions where additional security or support is required to improve the creditworthiness of a debt obligation or financial arrangement. This document, governed by South African law, is commonly used in project finance, corporate lending, and structured finance transactions. It establishes the terms under which a credit enhancer provides support through various mechanisms such as guarantees, letters of credit, or cash collateral. The agreement must comply with South African financial sector regulations, including the National Credit Act and Financial Sector Regulation Act, while addressing specific requirements for security registration, financial surveillance, and consumer protection where applicable. The document is particularly relevant in cases where lenders require additional comfort beyond the primary obligor's covenant, or where rating agencies require credit enhancement for desired credit ratings.
