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Trust And Retention Account Agreement

The difference between the trust and retention account and the Escrow-Trust and Retention (TRA) MECHANISM TRA-mechanism account has been a common feature in the financing of infrastructure projects. The objective is to protect project lenders from credit risk (risk of default of debt service) by isolating the cash flow of the project company. This is done by transferring control of future cash flow from the hands of borrowers (project company) to an independent agent, the tra agent, duly mandated by the lenders. 2. Infrastructure projects are implemented through a separate company created for this purpose (“zweckgesellschaft” – SPV) and the shares of the SPV would normally be held, among other things, by the project sponsors. The cash flow of the SPV (project company) is subject to a TRA agreement. As part of this agreement, the lender, borrower and TRA representative will enter into a three-part agreement that all project revenues will be paid into a single account managed by the designated TRA agent. Lenders establish, in agreement with the borrower, a detailed mandate for the TRA agent for the regular transfer and use of the funds available in the TRA. The mandate essentially outlines the nature and purpose of various payments, including debt servity to lenders. In accordance with their mandate, payment to lenders is made directly by the TRA representative without the borrower`s intervention.

By operation, THE TRA can be subdivided into several sub-TRAs dedicated to separate expense/end managers. With cash flows in several currencies, there could also be separate TRAs with the same agent or various TRA agents for processing cash flows in different currencies. Thus, on behalf of the lenders, the TRA agent acts as an agent and ensures that the cash flows of the borrower or the project company are exclusively accessible in accordance with the mandate. Thus, the TRA mechanism could be considered a sophisticated version of the traditional “No Link” accounts over which the bank concerned could not exercise its general right of guarantee. 3. It is clear that the mandate of the lenders for the acquisition of cash flow to the tra representative could impose the following order for the final use of the funds: all operating and maintenance costs of the project; Monthly contributions/limits on net capital and interest payments to lenders; A debt service reserve. B, amounting to 6 months, which could also be supported by a loan-to-term to be agreed by the sponsors of the company of the project; A cash reserve of . B four months of operating expenses; After fulfilling all of the above obligations, either by L/C or from project cash flow, the remaining funds, if any, would be available to the project company at its sole discretion or at the request of Agent DemTRA. .

4. A trust account and retention mechanism must be different from an agreement on an escrow account, although they are a bit similar. A fiduciary account is an agreement to protect the borrower from the risk of payment of goods or services sold by customers to them. This will be achieved by removing control of cash flow from the client`s hands over an independent agent who, in turn, could ensure the appropriation of cash flows in accordance with his mandate. Escrow`s agreement provides for a predetermined payment flow from the borrower`s clients to a specific account with a designated agent. Payment/deposit by the user/buyer on such an account is considered to be a respect for its responsibility to the supplier of goods/services. A trust agreement involves different parts of the parties within a TRA mechanism. Escrow`s agreement would generally consist of four parties: the lender, the borrower, the borrower`s clients and the trust agent. The mandate to trust agents would generally be underwritten by lenders in agreement with the borrower and his clients.

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