Collateral Transfer is where a Provider agrees to utilise his assets to the benefit of a third party, namely the Beneficiary (or Principal). This is done through a Collateral Transfer Agreement and involves the ‘transfer’ of the original asset (the ‘collateral’) into a new security that the Beneficiary can utilise. Hence the term “Collateral Transfer”. This is done by the Provider of the original or underlying asset pledging the asset to the facility bank (the Issuing Bank) in order that the Provider can instruct the remittance of a Bank Guarantee to the Beneficiary and his Recipient Bank. The Bank Guarantee that results can be used in any way by the Beneficiary. The underlying asset pledged to the Issuing Bank may be cash, bonds, stocks, gold or other assets (or often a combination of many) and is provided by the “Provider”.
The Provider will be a private equity or investment group or a collateral management company making investments on behalf of its clients. A Provider will often receive the assets through private label funds set up for the purpose, or from hedge funds, pension funds or high net worth individuals and family offices. Provider’s are able to offer its investors good returns on non-liquid assets by offering Collateral Transfer facilities. This makes good opportunity to investors that wish to seek additional returns by placing their assets with the Provider. The Provider then in-turn seeks suitable clients (beneficiaries) to receive Collateral Transfer facilities. The Contract Fees paid to the Provider by the Beneficiary for the use of the bank guarantee are then divided among the investors (the owners) of the original underlying asset as a return. A portion of course retained by the Provider as their management fee. This allows investors to obtain good annual returns on assets they would otherwise not be able to invest. For example, valuable artworks, real estates, stagnant capital, etc.The Provider will use his bank relationship to pledge these assets to the Issuing Bank and have them issue a Bank Guarantee to the Beneficiary for a given term (usually 12 months renewable terms). The Beneficiary will pay to the Provider a Contract Fee for the use of the Bank Guarantee over the term.
The facility is governed by a Collateral Transfer Agreement (commonly referred to as a CTA). Each CTA is bespoke to the specific transaction. This Agreement binds the Provider to issue the Guarantee to the Beneficiary for the given term and binds the Beneficiary to accept the Guarantee and to pay the Contract Fee to the Provider for its use. It is of course known to all parties that the Beneficiary will use the Bank Guarantee to raise credit and will therefore encumber the Bank Guarantee (i.e the lending bank will lien it as security). This is referred to as ‘monetisation’ of the Guarantee. Whist this is of course acceptable to the Provider, the Beneficiary will need to make a declaration that they adhere to remove any encumbrance over the Guarantee 5 days prior to the Bank Guarantee expiry date. Therefore the Beneficiary must make his own arrangements with his bank (or the bank lending the credit against the bank guarantee) to repay any loans secured on it. Otherwise the Beneficiary will be in breach of the CTA. This is referred to as the ‘exit strategy’, i.e. how the Beneficiary will exit the contract and repay the debt secured on the Guarantee.
Commonly, the Beneficiary will refinance with the lending bank to remove any encumbrance over the guarantee at expiry, or choose to renew the CTA for a further 12 month period. If the Beneficiary fails to repay any loans secured on the Guarantee at expiry, the lending bank will call it and the Provider will lose his pledged assets. In these cases, the Provider will take recourse of debt recovery against the Beneficiary. It is therefore required that the Beneficiary is reputable and financially sound and that is why there is the initial due diligence and acceptance period before we are able to offer Terms. Only when the Beneficiary is accepted are Terms offered.Therefore, to exit the contract successfully, the Beneficiary will utilise loan funds raised on the Guarantee for commercial purposes. Rather like a bridge loan, the Beneficiary will need to receive his investment or liquidate his project prior to the expiry of the Guarantee, allowing him to clear and remove any encumbrance over it.
It is common to find that a Beneficiary will use Collateral Transfer facilities to either participate in trade positions where his returns are received prior to expiry of the bank guarantee, or for property development projects where liquidation or refinance of the bricks and mortar once construction is complete will serve as his exit strategy. This fairs well with these types of facilities and are preferred by Providers. If you wish to discuss any details concerning these facilities, please do not hesitate to contact us by telephone or by selecting contact us / general enquiry at the top.
MONETIZATION PROGRAM FOR LEASED AND OWNED INSTRUMENTS
Introducing a Special Non-Recourse Monetization Program for Leased and Owned Instruments from most world Banks including Low Rated and Non Rated Banks. This program will provide a 35 % LTV non-recourse monetization for Bank Guarantees and Stand By Letters of Credit that CAN/MUST be delivered by MT760.
There are two biggest challenges to the completion of a successful transaction are as follows:
1. Fraudulent Instrument Providers- The number of scam artists and fraudsters that purport to be legitimate Instrument Providers is currently at epic proportions. As a result of this, many well meaning and good faith clients have lost considerable monies to these phony Instrument Providers.
One main scheme of fake providers is to assert to their clients and to the monetizer that they, in fact, did send out a Swift (MT-799 and/or MT-760) when no swift was ever received by the Monetizer's receiving Bank. This has caused untold delays in ascertaining whether the Swift was ever sent as a detailed search is usually undertaken to find this 'missing' Swift. Finally, after a lengthy effort, it is revealed that No Swift was ever sent and the client is left with no instrument and often times, at least Several Hundred Thousand Dollars or Euros poorer. In addition, the monetizer's own relationship at their receiving Bank is damaged due to the fact that the monetizer was working with a Fraudulent Instrument.
As a result of this epidemic of fraudulent instruments, a procedure that most monetizers has put in place requires direct e-mail Banker to banker communication from the Instrument Provider's Sending Bank's bank officer to the Receiving Bank's bank officer stating that the Sending Bank is RWA to issue a BG or SBLC by MT-760. The Bank Officer at the receiving Bank will reply by e-mail that they are RWA to receive the instrument. All e-mail communications must be done on a Banker-to-Banker basis using Bank e-mail addresses. In addition, the Bank contact phone number of the Sending Banker is obtained and the e-mail addresses and Sending Bank Officer's phone number are validated by calling the Sending Bank's main number. For Fresh Cut Instruments clients will be asked to provide a copy of their contract with their Instrument Provider so that it can checked with the Instrument Provider in an ever growing data base to review any previous experience with this Instrument Provider. When an Instrument Provider or client is unable to unwilling to follow this procedure, the likelihood of the instrument being fraudulent is very high and the file should be immediately pass.
2. Banks inability to send a MT-760; monetizing instruments from Low Rated as well as Non-Rated Banks, we have had extensive experience in monetizing instruments from all kinds of Banks. A main problem that we have faced is the issue of the Sending Bank's inability to actually send a correct and proper MT-760 to the receiving Bank. This problem has often occurred when a Smaller Sending Bank is using a correspondent Bank to deliver the MT-760. As a result, we have developed our own data base of Banks and our past experience with a specific Bank will determine our appetite to receive more paper from a particular institution. Many people refer to this as sblc funding or sblc financing since you are essentially obtaining cash on the basis of the sblc or bank guarantee. This process allows you to: Monetize instruments for cash, Monetize instruments for buy/sell platform entry and Monetize instruments for both cash and buy/sell platform entry.
The Provider will be a private equity or investment group or a collateral management company making investments on behalf of its clients. A Provider will often receive the assets through private label funds set up for the purpose, or from hedge funds, pension funds or high net worth individuals and family offices. Provider’s are able to offer its investors good returns on non-liquid assets by offering Collateral Transfer facilities. This makes good opportunity to investors that wish to seek additional returns by placing their assets with the Provider. The Provider then in-turn seeks suitable clients (beneficiaries) to receive Collateral Transfer facilities. The Contract Fees paid to the Provider by the Beneficiary for the use of the bank guarantee are then divided among the investors (the owners) of the original underlying asset as a return. A portion of course retained by the Provider as their management fee. This allows investors to obtain good annual returns on assets they would otherwise not be able to invest. For example, valuable artworks, real estates, stagnant capital, etc.The Provider will use his bank relationship to pledge these assets to the Issuing Bank and have them issue a Bank Guarantee to the Beneficiary for a given term (usually 12 months renewable terms). The Beneficiary will pay to the Provider a Contract Fee for the use of the Bank Guarantee over the term.
The facility is governed by a Collateral Transfer Agreement (commonly referred to as a CTA). Each CTA is bespoke to the specific transaction. This Agreement binds the Provider to issue the Guarantee to the Beneficiary for the given term and binds the Beneficiary to accept the Guarantee and to pay the Contract Fee to the Provider for its use. It is of course known to all parties that the Beneficiary will use the Bank Guarantee to raise credit and will therefore encumber the Bank Guarantee (i.e the lending bank will lien it as security). This is referred to as ‘monetisation’ of the Guarantee. Whist this is of course acceptable to the Provider, the Beneficiary will need to make a declaration that they adhere to remove any encumbrance over the Guarantee 5 days prior to the Bank Guarantee expiry date. Therefore the Beneficiary must make his own arrangements with his bank (or the bank lending the credit against the bank guarantee) to repay any loans secured on it. Otherwise the Beneficiary will be in breach of the CTA. This is referred to as the ‘exit strategy’, i.e. how the Beneficiary will exit the contract and repay the debt secured on the Guarantee.
Commonly, the Beneficiary will refinance with the lending bank to remove any encumbrance over the guarantee at expiry, or choose to renew the CTA for a further 12 month period. If the Beneficiary fails to repay any loans secured on the Guarantee at expiry, the lending bank will call it and the Provider will lose his pledged assets. In these cases, the Provider will take recourse of debt recovery against the Beneficiary. It is therefore required that the Beneficiary is reputable and financially sound and that is why there is the initial due diligence and acceptance period before we are able to offer Terms. Only when the Beneficiary is accepted are Terms offered.Therefore, to exit the contract successfully, the Beneficiary will utilise loan funds raised on the Guarantee for commercial purposes. Rather like a bridge loan, the Beneficiary will need to receive his investment or liquidate his project prior to the expiry of the Guarantee, allowing him to clear and remove any encumbrance over it.
It is common to find that a Beneficiary will use Collateral Transfer facilities to either participate in trade positions where his returns are received prior to expiry of the bank guarantee, or for property development projects where liquidation or refinance of the bricks and mortar once construction is complete will serve as his exit strategy. This fairs well with these types of facilities and are preferred by Providers. If you wish to discuss any details concerning these facilities, please do not hesitate to contact us by telephone or by selecting contact us / general enquiry at the top.
MONETIZATION PROGRAM FOR LEASED AND OWNED INSTRUMENTS
Introducing a Special Non-Recourse Monetization Program for Leased and Owned Instruments from most world Banks including Low Rated and Non Rated Banks. This program will provide a 35 % LTV non-recourse monetization for Bank Guarantees and Stand By Letters of Credit that CAN/MUST be delivered by MT760.
There are two biggest challenges to the completion of a successful transaction are as follows:
1. Fraudulent Instrument Providers- The number of scam artists and fraudsters that purport to be legitimate Instrument Providers is currently at epic proportions. As a result of this, many well meaning and good faith clients have lost considerable monies to these phony Instrument Providers.
One main scheme of fake providers is to assert to their clients and to the monetizer that they, in fact, did send out a Swift (MT-799 and/or MT-760) when no swift was ever received by the Monetizer's receiving Bank. This has caused untold delays in ascertaining whether the Swift was ever sent as a detailed search is usually undertaken to find this 'missing' Swift. Finally, after a lengthy effort, it is revealed that No Swift was ever sent and the client is left with no instrument and often times, at least Several Hundred Thousand Dollars or Euros poorer. In addition, the monetizer's own relationship at their receiving Bank is damaged due to the fact that the monetizer was working with a Fraudulent Instrument.
As a result of this epidemic of fraudulent instruments, a procedure that most monetizers has put in place requires direct e-mail Banker to banker communication from the Instrument Provider's Sending Bank's bank officer to the Receiving Bank's bank officer stating that the Sending Bank is RWA to issue a BG or SBLC by MT-760. The Bank Officer at the receiving Bank will reply by e-mail that they are RWA to receive the instrument. All e-mail communications must be done on a Banker-to-Banker basis using Bank e-mail addresses. In addition, the Bank contact phone number of the Sending Banker is obtained and the e-mail addresses and Sending Bank Officer's phone number are validated by calling the Sending Bank's main number. For Fresh Cut Instruments clients will be asked to provide a copy of their contract with their Instrument Provider so that it can checked with the Instrument Provider in an ever growing data base to review any previous experience with this Instrument Provider. When an Instrument Provider or client is unable to unwilling to follow this procedure, the likelihood of the instrument being fraudulent is very high and the file should be immediately pass.
2. Banks inability to send a MT-760; monetizing instruments from Low Rated as well as Non-Rated Banks, we have had extensive experience in monetizing instruments from all kinds of Banks. A main problem that we have faced is the issue of the Sending Bank's inability to actually send a correct and proper MT-760 to the receiving Bank. This problem has often occurred when a Smaller Sending Bank is using a correspondent Bank to deliver the MT-760. As a result, we have developed our own data base of Banks and our past experience with a specific Bank will determine our appetite to receive more paper from a particular institution. Many people refer to this as sblc funding or sblc financing since you are essentially obtaining cash on the basis of the sblc or bank guarantee. This process allows you to: Monetize instruments for cash, Monetize instruments for buy/sell platform entry and Monetize instruments for both cash and buy/sell platform entry.
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