RWA

What is an RWA Letter?

A “Ready, Willing & Able Letter” (RWA Letter) verifies that a bank or financial institution is prepared to proceed on behalf of a client for a specified financial transaction. For In3’s purposes, the transaction is usually a capital guarantee brought forward by the project developer or a sponsor for one or more identified projects to be financed through our partners.

The RWA Letters states that the sending bank will follow through per establish banking rules, such as the Uniform Rules of Demand Guarantees (URDG ICC Pub. 758), and send the actual guarantee instrument when the time comes. When is that time? The guarantee itself, US$ or Euros, would be sent bank-to-bank after completion of our due diligence, once all contracts have been negotiated, agreed, signed, and countersigned. This is the last step before financial closing.

Thus, an RWA Letter is stating the bank’s intention to send the referenced guarantee instrument only when asked to do so. Sending the guarantee instrument is contingent upon the parties to first agree that the funding has been arranged per mutually acceptable terms and conditions. There is nothing directly binding, irrevocable, or “material” at the time of the RWA Letter issuance. No money should change hands at that point.

Sometimes an RWA letter is sent together with a SWIFT MT-799 (considered “pre-advice,” meaning that it is a text message only — does not constitute a guarantee), though not required. Without optional MT-799, a signed RWA Letter can be sent via Email or as requested by the receiving bank.

The main purpose of the RWA Letter is for the project’s Developer or Sponsor to signal their intent to provide the required capital guarantee. BG/SBLCs and SGs use SWIFT MT760, a widely-used message type for such instruments, so that we may respond with the name and location of the receiving bank and proceed through the steps of pre-qualifying, qualifying/vetting, reach terms for funding, drawdown of funding and launching the completed project(s).

The alternative to these instruments is called a Commercial Promissory Note, where a bank adds an “aval” or stamp, which we call an Avalized Promissory Note (APN).

This use of an RWA Letter launches due diligence and also forms an integral part of In3’s capital partner due diligence. For all three instrument type RWA letters, go here.