Case Study: SBLC for a Texas Solar Developer Without 100% Cash Collateral
A Texas solar company needed a bank issued Standby Letter of Credit to satisfy counterparties and hit milestone dates. The issuing bank initially demanded a full cash block. That would have drained the sponsor and delayed construction. We arranged an alternative structure that cleared compliance, protected the bank, and kept the developer’s liquidity intact.
Outcome:
SBLC activated with a 400K cash requirement after structured underwriting and a collateral provider pledge over a portion of PPA revenues. Sponsor paid about 200K premium for activation. Entire process completed in 58 days.
Deal Facts
| Parameter |
Details |
| Client |
Utility scale solar developer in Texas |
| Instrument |
Standby Letter of Credit issued by a commercial bank |
| Initial bank ask |
100 percent cash collateral |
| Final cash posted |
400K cash with additional non cash collateral support |
| Collateral provider consideration |
Pledge over a portion of PPA revenues |
| Activation premium |
About 200K paid by sponsor to activate the SBLC structure |
| Time to complete |
58 days from mandate to SBLC activation |
The Challenge
Liquidity pressure
A full cash block would have slowed construction and strained vendor payments.
Bank risk policy
Issuing bank wanted hard collateral due to project stage and counterparty risk.
Multi party contracts
PPA, EPC, interconnection, and O&M had to be read together to size risk.
Deadline risk
Milestones and liquidated damages did not allow for a long collateral hunt.
What We Did
Arranged collateral support
Sourced a provider prepared to back the SBLC in return for a pledge over a portion of PPA revenues.
Structured the facility
Mapped the payment waterfalls and reserve mechanics to show bank coverage without full cash.
Underwrote the contract stack
Reviewed PPA, EPC, interconnection, and O&M to identify covenants, cure rights, and stress points.
Negotiated with the bank
Presented a risk memo and cash flow model. Achieved a reduced cash requirement of 400K.
Final Structure
| Element |
How It Worked |
| SBLC issuance |
Commercial bank issued SBLC after review of underwriting memo and revised collateral package |
| Cash component |
Sponsor posted 400K cash instead of a full cash block |
| Collateral provider |
Third party provided additional support and received a pledge over part of PPA revenues |
| Activation premium |
Sponsor paid about 200K to activate the structure and secure timing |
| Bank comfort |
Security tied to revenue pledge and tighter covenants on reporting and reserves |
Underwriting Highlights
- Cash flow model aligned PPA revenue timing with reserve and SBLC obligations
- Covenant set covering DSCR triggers, information rights, and cure periods
- Inspection of EPC terms for LD exposure and practical cure mechanics
- Confirmation of interconnection timing and commissioning milestones
- Pledge language limited to a defined slice of PPA revenue with waterfall priority
Timeline to Activation
| Phase |
Work Completed |
Elapsed Time |
| Days 1 to 10 |
Mandate, KYC, document intake, preliminary structuring |
10 days |
| Days 11 to 28 |
Contract underwriting, collateral provider onboarding, draft pledge terms |
18 days |
| Days 29 to 45 |
Bank negotiations, covenant set, reserve mechanics agreement |
17 days |
| Days 46 to 58 |
Final approvals, cash post of 400K, activation premium payment, SBLC issuance |
13 days |
Results
Liquidity preserved
Sponsor avoided a full cash block while meeting counterparty security requirements.
Bank comfort achieved
Risk reduced through revenue pledge, clear covenants, and a realistic reserve plan.
Deadline met
SBLC activated inside 58 days so construction timelines stayed intact.
Clean governance
All parties had documented triggers, cure periods, and reporting duties.
Need an SBLC without freezing your cash
Send your contract stack, SBLC draft, and timeline. We will propose a collateral route, a covenant set the bank can accept, and an execution plan that fits your milestones.
Start the Process
This case study reflects a real engagement with identifying details adjusted for confidentiality. Any financing or collateral arrangement is subject to independent credit approval, KYC and AML checks, and executed documentation. Terms vary by counterparty, market conditions, and project profile.