Basic Knowledge of Guarantees

Question 1

Does the business situation require issuance of sales-related or credit guarantee?

Question 2

Abstract or accessory guarantee?

Question 3

Who should issue the guarantee (Siemen company or bank guarantee)

Question 4

Sales related Guarantee

Answer 4

Advance payment guarantee (ensures to refund an advance payment in event of non-performance)
Bid Bonds: Ensures that bidder adheres to bid and concludes sales contract if awarded
Performance guarantee: Guarantor promises to compensate damage or loss that may result from failure of obligor to meet contractual obligation
warranty bonds: Insures the beneficiary against defects

Question 5

Credit Guarantee

Answer 5

Siemens acts as Guarantor towards a bank to guarantee for loan payment of obligor (e.g. customer)

Question 6

Guarantee - three involved parties

Answer 6

1) Guarantor
2) Beneficiary
3) Primary obligor

Question 7

Accessory guarantee - definition

Answer 7

Tied to the primary obligation of the underlying transaction (go to court first and pay afterwards) PREFERRED, lower risk

Question 8

Abstract guarantee

Answer 8

Legally independent of the underlying transaction (pay first, go to court afterwards)

Question 9

Guidance Parent Company Guarantee

Answer 9

Shall be avoided as far as possible. Corporate Guarantees below 500k will not be issued for any new project. Bank guarantees below 10k shall not be issued unless mandatory due to legal requirements

Question 10

Bid: When does CF F need to be involved?

Answer 10

For all guarantees >500k