Letters of Guarantee

A letter of guarantee is an undertaking the bank issues on your behalf in favor of a third party (a government body, a project owner…) guaranteeing that you'll meet some obligation — like a tender-entry guarantee or a contract performance guarantee. No actual cash leaves you when it's issued, but it freezes part of your facility limit with the bank and charges you fees. So Nama tracks the letter of guarantee as a master file with a succession of movement documents that issue it, receive and deliver it, amend it and close it — always keeping two snapshots: the initial values at issue and the current values after amendments.

Required license

Letters of guarantee are part of the accounting-lgt license.

The letter's lifecycle

Every screen hangs off the Banks > Letters Of Guarantee root:

1. LGT Request — documenting the request before issuing (no accounting effect).
2. Letter Of Guarantee — the master file in its initial status "Initial".
3. LGT Issue — the moment the bank actually issues the letter (it posts to the ledger, and the status flips to "Issued").
4. LGT Receipt / Delivery — tracking the circulation of the paper copy with the beneficiary.
5. LGT Changing — extending the term or changing the value or fees (updates the current values and records the change fees).
6. LGT Closing — closing the letter when it ends or is canceled.

An LGT Opening Doc is used to enter the balances of existing letters when starting work on the system.

The letter's master file

On the Letter Of Guarantee screen (Banks > Letters Of Guarantee > Letter Of Guarantee) the letter's data is defined:

• Basic information: linking the letter to the LGT request that preceded it, to the facility limit it reserves from, and to a project contract when needed.
• Initial LGT values: a snapshot of the issue terms — the amount and currency, who it's delivered to, from date / to date, the covered amount (covered in cash), the facilities (the reserved portion of the facility limit), and the fees.
• Letter of guarantee (current values): the LGT type, the guarantee type and the status, plus the values in force after any amendment (amount, covered, facilities, change fees).

The guarantee type classifies the letter's purpose: initial guarantee (tender entry), final guarantee (performance), advance-payment guarantee, customs guarantee, or other types.

Letter statuses

Status	When
Initial	when saved before issuing.
Issued	after the issue document posts.
Received / Totally Delivered	after tracking the circulation of the letter copy.
Finished	after a normal close.
Canceled	on cancellation.
Liquidated	when the letter is liquidated (the beneficiary claims its value).

Issuing and reserving the facility

When an LGT Issue (Banks > Letters Of Guarantee > LGT Issue) is recorded the accounting effect posts and the facility portion is reserved. The issue term covers several sides: LGT amount debit/credit, facilities amount debit/credit (the reserved portion of the facility limit), fees debit/credit (with tax fees 1 and 2), and the covering side. (Where these accounts come from is explained in the Document terms reference.)

Facility-limit check

At issue, the system checks that the total reserved doesn't exceed the facility limit linked to the letter. If it does, issuing is blocked. The details of facility limits are in Credit Facilities.

Receipt, delivery, amendment and closing

The Receipt and Delivery documents track the circulation of the paper copy of the letter. Changing is used to extend the letter's term or change its value or fees — it updates the current values while keeping the initial values as a reference, and records the change fees. Finally, Closing closes the letter and releases the reserved facility.

Reports

Report	Answers
Letter of Guarantee movements (SYSR-LGT001)	Each letter's movements: issue, amendments, closing, and covered/facility balances.

For Support

• "Couldn't issue the letter — limit exceeded" — the reserved amount exceeds the linked facility limit; see Credit Facilities.
• "What's the difference between initial and current values?" — the initial ones are a snapshot of the issue terms, and the current ones reflect the latest amendment; both stay on the letter for comparison.
• "Where do the amount, facility and fee accounts come from?" — from the LGT Issue term; see Document terms.
• The accounting-processing mechanism is in How documents are processed into accounting effects.