A standby bond purchase agreement is a type of liquidity facility where a third party, such as a bank, “stands by” to purchase an issuer’s bonds if they cannot be immediately remarketed to new investors. When interest rates rise, for example, bondholders may exercise a put option that requires an issuer to buy back its bonds, generally at their par value. If the issuer cannot immediately remarket the bonds to new investors, the third party under the standby bond purchase agreement buys the bonds. These agreements often include a provision requiring a higher rate of interest to be paid during the time the standby bond purchaser holds the bonds.