As the recession settles deeper into the global economic fabric, pension plan sponsors and the governments that regulate them are looking for relief. For some private pension plans, that relief may come in the form of letters of credit.
But despite the advantages, letters of credit are not for everyone and they are not a panacea for all that ails pension funds in Canada, said Mitch Frazer. "They are best for companies that could get a decent interest rate to fund their letter of credit. If you’re a large company and you have a triple-A rating, it’s going to be easier to get a letter of credit."