Commitment LETTERSRISK ALLOCATION
The commitment letter allocates risk between the borrower andlender by
specifying the circumstances under which the lender is notrequired to fund. For example, a lender may be unwilling to accept therisk that the credit quality of the borrower declines materiallybetween signing the commitment letter and funding or that the loansyndication market deteriorates so that it is more difficult to sellloans at the time of funding than when the commitment was made.
Hmm.. another little loophole. Sure seems now like that AUS $ PR on the 18th was premeditated, "JUST IN CASE" the LOAN SYNDICATION MARKET DETERIORATES!!! Sneaky... Now if things don't pan out they will just say " we told you back on January 18th that foreign exchange rates were unfavorable. They even made mention of it in the NR for Christ sake!!!
Does't mean they can't back out
The legal effect of a commitment letter may be to give theborrower a cause of action against the lender if the lender does notprovide funding to the borrower on the terms and conditions of thecommitment letter. A cause of action also may exist by a third partywho relied on the commitment letter against the lender who breachesits commitment.
Funny thing is I'm not a basher. Been long on MOL for a couple of years but I'm just being realistic.