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Renewing collateral transfer agreements

IntaCapital Swiss SA is a boutique finance company head-quartered in the heart of Geneva, Switzerland and with representation world-wide.

Companies that are unable to secure funding from traditional financiers, will usually contact IntaCapital Swiss, Europe’s leading boutique finance house that specialises in Collateral Transfer and Collateral Transfer Agreements. A Collateral Transfer Agreement is where one company designated the provider, will lease a Bank Guarantee, to another company, designated the Beneficiary.

For more information on the Provider, please see “Who Are Providers And What Are Their Benefits From Leasing Bank Guarantees”.

The Beneficiary and the Provider will usually agree to lease a Bank Guarantee for one year. However, if the Beneficiary decides to renew the Collateral Transfer Agreement, then they must inform IntaCapital Swiss at least one month before the expiry of the Bank Guarantee, as they have to get agreement from both the Provider and the Lender.

Whilst a Collateral Transfer Agreement usually has an end date of one year, a Bank Guarantee can be contracted for two years and up to seven years, and in this instance, the Bank Guarantee will automatically roll over, as long as all the criteria within the Collateral Transfer Agreement are met. However, for those contracts with an end date of one year, the Beneficiary can renew the agreement for a second year, providing they contact IntaCapital Swiss no later than one month before expiry.

There is a list of costs that are for the account of the Beneficiary when entering into a Collateral Transfer Agreement. These are broken down into, the Provider’s fees, one year’s cost of borrowing, arrangement fees, booking fees, legal and due diligence fees. In year two and upwards to year seven, the Beneficiary will only have to bear the costs of one year’s cost of borrowing and the Provider’s fees.

Historically, the Provider’s fees remain flat, and are subject to little change. However, one year’s cost of borrowing relies on the money markets at the time the Collateral Transfer Agreement is renewed. Any fluctuations in the one-year Euribor and one-year Libor markets, resulting in an increase in the cost of borrowing, will be borne by the Beneficiary.