Credit Enhance Bond: A Lesson in Letters of Credit

last updated on Tuesday, April 12, 2016 in Letters of Credit

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Established in 2005, Bridgewater Bank operates in commercial real estate and, specifically, in multi-family lending. Bridgewater Bank has four Minnesota locations within the Twin Cities Metro area and has approximately $1 billion in assets.


One of the challenges Bridgewater Bank faces is working with borrowers who utilize bonds as a source of financing their projects. These financing structures generally require a letter of credit to support the underlying bonds and the interest charged on the bonds is determined by the financial strength of the Letter of Credit provider. In order to obtain a AAA rating on the bonds, the project structure needed additional financial backing.


Pair a Confirming Letter of Credit with a Community Investment Advance to not only support the bond financing, but provide the loan financing on eligible projects.

Bridgewater Bank was able to issue an FHLB Des Moines Confirming Letter of Credit to help their customer continue their project. “This product allowed us to provide the financial support needed on the project and as a result the bonds were rated at a very high grade (MIG-1 by Moody's) which kept the borrowing cost to the borrower very low,” said Joe Chybowski, Vice President of Finance at Bridgewater Bank. “We pride ourselves on providing responsiveness and unique solutions, and being able to find this solution for our borrower was very helpful.”


Bridgewater Bank issues FHLB Des Moines Confirming Letters of Credit to guarantee the principal and interest payments to bondholders and credit enhance the bonds with the FHLB Des Moines Aaa/AA+ rating. Using FHLB Des Moines Letters of Credit has helped Bridgewater Bank retain their customers, especially their highest, best quality borrowers, as they are more comfortable knowing FHLB Des Moines is behind them with extra protection.

For More Information

Letters of Credit
Community Investment Advance


  1. Confirming Letter of Credit
  2. Funding
  3. Letters of Credit
  4. Solutions
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