Discover the key elements about the ‘leasing’ of Bank Guarantees, also referred to as Collateral Transfer.

Collateral Transfer often assumed to be a Leased Bank Guarantee is an incorrect assumption, and is used as a medium for one company (The Beneficiary), to borrow collateral, usually a Demand Bank Guarantee from another company, (The Provider), for a pre-determined or temporary period of time, (usually one year), and on the expiry of which, ownership of the instrument returns to the Provider.

The Provider and the Beneficiary enter into a contract, the Collateral Transfer Agreement, which once verified and due diligence completed, will allow the Beneficiary to instruct his bank, (The Receiving Bank), to pay a fee to the, referred to as the Contract Fee, representing the cost for the temporary use of the Bank Guarantee. The Bank Guarantee is transferred from The Issuing Bank to The Receiving Bank via SWIFT, (“Society for Worldwide Interbank Financial Telecommunications”), using a MT 760 designation, which is the dedicated swift message for Bank Guarantees and Letters of Credit.

A Collateral Transfer Agreement is an agreement between two parties for the temporary transfer of a Bank Guarantee and as such does not impact on the wording of a Demand Bank Guarantee, which is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758). This allows the Beneficiary to utilise the Demand Bank Guarantee for various business transactions usually a loan or a line of credit, alluded to as Credit Guarantee Facilities.

IntaCapital Swiss enjoys a close relationship with their Providers, usually Hedge Funds, Sovereign Wealth Funds and Private Equity Funds, and due to their keen negotiating skills, the Providers have agreed to reduce their fees, thus making Credit Guarantee Facilities through the medium of the Collateral Transfer Facility, accessible to those companies occupying the medium and smaller ends of the market.

The Collateral Transfer product is offered by IntaCapital Swiss, as a unique way in which the smaller company can gain access to Credit Guarantee Facilities, such as loans and lines of credit, where before in this market of declining credit, access to such credit facilities were virtually impossible