Renewing Collateral Transfer Agreements

There are many companies looking to obtain lines of credit and banks loans, referred to as Credit Guarantee Facilities from non-traditional financing, and for this they will approach IntaCapital Swiss Europe’s leading expert in Collateral Transfers and Collateral Transfer Agreements. A Collateral Transfer Agreement is a renewable contact where one company, the recipient of the Bank Guarantee known as the Beneficiary, will lease or rent a Bank Guarantee from another party, known as the Provider.

It is customary for the Beneficiary to lease a Bank Guarantee for one year, but in the event they wish to renew the contract/agreement for a second year, they will have to inform IntaCapital Swiss at least one month before the expiry of the Bank Guarantee, so they may obtain approval from the Provider and the Lender.

A Collateral Transfer Agreement also allows for a Bank Guarantee to be leased for a maximum of seven years. In such cases and providing the Terms and Conditions of agreement have not been broken, the Collateral Transfer Agreement will automatically renew.

Whenever a Collateral Transfer Agreement is signed, there are various costs and fees that must be borne by the Beneficiary and they are the Provider’s fees, cost of borrowing for one year, due diligence fees, arrangement fees, legal and booking fees. However, if the Bank Guarantee is renewed, the only costs to the Beneficiary are one year’s interest on borrowings and the Provider’s fees.

There will be fluctuations in costs for the Beneficiary year on year, and while its usual for the Provider’s fees to stay the same, the yearly cost of borrowing will change due to market pressures on twelve-month Libor and twelve-month Euribor. Any increases in the cost of borrowing will be for the account of the Beneficiary.