About Credit Lines & Monetisation
Bank Guarantees received under Collateral Transfer facilities may be used by the Beneficiaries to secure lines of credit at their bank. Typically, a banker will have no objection to offering credit against Bank Guarantees received in this manner up to 100% of face value, less of course advance interest charges and bank fees. However, typical lending rates (loan to value or LTV) will be around 80% to 90% of face value. The total credit term can be for the duration of the Guarantee, i.e. 1 to 5 years, but of course will not exceed the term (or expiry) of the Guarantee.
The Guarantees that are issued under these types of facilities are worded specifically to secure credit lines. Guarantees are issued under ICC758 protocol and are readily accepted by all international and private banks. Often they are referred to as a ‘Letter of Guarantee’, ‘Credit Facilities Guarantees’ or ‘Standby letter of credit’.
It is important to note that although the Bank Guarantee is obtained (or as others choose to say ‘leased’), through the Collateral Transfer facility, this has no bearing on the quality of the Guarantee and can still be used to raise credit and loans. As the verbiage of the Guarantee will be ICC758 standard approved wording, there is no mention of ‘lease’ within the instrument itself. Remember, ‘leasing’ is a misnomer and is never a phrase used in these facilities.
It is also important to know however, that by using the Guarantee to secure lines of credit and loans, interest charges will apply in addition to the Contract Fee (the ‘rental’ fee of the Bank Guarantee). From our experience, international bank lending rates for loans secured against such high quality security tend to be in the region of 3,00% per 12 month term, possibly more. This will differ in certain jurisdictions and currencies.
These facilities suit financial requirements for terms under 5 years or where returns are high, allowing higher expenditure on annual rates. The longer the term, the less suited Collateral Transfer facilities are and therefore we discourage terms in excess of 5 years, although they are achievable.
IntaCapital Swiss can of course assist its clients in raising credit against guarantees of this type in the event that our clients own bank declines to offer lending facilities. We hold strong relationships with understanding banks and private equity groups holding an appetite to expand lending opportunities in this area. It should be noted however that additional fees will apply if you utilise our services to obtain credit lines.
IntaCapital can also open banking and lending facilities for its selected clients by direct introduction to the willing bank. Please enquire for a detailed quotation.
It is of course common sense that you first need to be approved for receiving the Bank Guarantee prior to applying for credit against it.