Bank Guarantees are the crucial elements in Collateral Transfer which is the correct term, for Leased Bank Guarantees. IntaCapital Swiss have spent many years building up an impressive data-base of companies who “provide” Bank Guarantees for Collateral Transfer – Collateral Transfer Providers.
These companies, referred to as Providers or Provider Groups, are known as Sovereign Wealth Funds, Private Equity Funds, Hedge Funds, Institutions with large cash balances and Larger Family Offices. They all have very large asset portfolios some of which are used to provide Bank Guarantees for the Collateral Transfer market where they can enter into a contract, the Collateral Transfer Agreement, to lease a Bank Guarantee to another company, (referred to as the Beneficiary).
Under the Terms and Conditions of a Collateral Transfer Agreement, the Provider will instruct their bank to transfer a Bank Guarantee to the Beneficiary, for a temporary period of time, usually one year. The Provider receives payment from the Beneficiary for use of the Bank Guarantee known as the Collateral Transfer Fee.
Some of the assets that the Provider or Provider Groups own are securities such as a Medium-Term Note, (MTN), or a Long-Term Note, (LTN). Inevitably these securities carry low bearing coupons or interest rates, and are used as collateral to issue Bank Guarantees for Collateral Transfer where the return is substantially higher.
It is important to note, that without Provider Groups, the access to lines of credit and loans, alluded to as Credit Guarantee Facilities for companies seeking such credit facilities would be severely diminished. Fortunately, IntaCapital Swiss have built up close ties and relationships with Providers and Provider Groups, in a host of global financial centres, ensuring the continuing availability of Credit Guarantee Facilities.