Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.

In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.

Although the global “credit crisis” phenomenon has been dominating the headlines for some time, the implications of it in Canada may just be beginning in the form of increased distressed M&A activity. The past decade of unprecedented growth and the abundance of liquidity has been replaced in the past few months by a more conservative lending environment. Around the country, bank loan officers are busy reviewing financial statements and covenant compliance certificates, and assessing loan renewals of corporate clientele.