Collateral Transfer, mistakenly referenced as Leased Bank Guarantees, (See What Is a Leased Bank Guarantee), is the provision for assets, in most cases a Demand Bank Guarantee, (See What Is a Bank Guarantee), to be lent by one company, (The Provider), to another company, (The Beneficiary). The Demand Bank Guarantee is lent for a specified and temporary period of time, and on expiry of that time, the Bank Guarantee ownership reverts to the Provider.
Collateral Transfer is legally represented by the Collateral Transfer Agreement, a contract entered into by the Provider and the Beneficiary, and upon successful due diligence by their bankers, The Issuing Bank and The Receiving Bank respectively, the Beneficiary arranges to pay the Contract Fee, which is the Provider’s fee for lending the Bank Guarantee to the Beneficiary. The Provider will instruct The Issuing Bank to transfer the Bank Guarantee by swift, (“Society for Worldwide Interbank Financial Telecommunications”), to The Receiving Bank using the designated code MT 760, a dedicated swift message for transmitting Bank Guarantees and Letters of Credit.
The Agreement allows for the Demand Bank Guarantee which is governed by the ICC Uniform Rules for Demand Guarantees, (URDG 758), to be utilised by the Beneficiary for a myriad of purposes, though traditionally used for loans and lines of credit, referred to as Credit Guarantee Facilities.
The Providers of collateral for the Collateral Transfer Facility are usually Hedge Funds, Larger Family Offices, Sovereign Wealth Funds and Private Equity Funds, and after much negotiating with IntaCapital Swiss, (See About IntaCapital Swiss) have agreed to lower their rates allowing the smaller company to access the market.
The overriding factor for companies today is the dearth of available credit facilities. Collateral Transfer is proving an excellent means of accessing Credit Guarantee Facilities, and through IntaCapital Swiss and their unique facility, more and more companies are now able to access bank loans and lines of credit