The facility is often utilised by a company, (The Beneficiary) looking to borrow collateral, usually a Demand Bank Guarantee, from another company, (The Provider) for a temporary period of time, usually one year, to raise a loan or a line of credit, referred to as Credit Guarantee Facilities. Collateral Transfer often mistakenly referred to as a Leased Bank Guarantee, is underpinned by the Collateral Transfer Agreement, a contract signed by both the Provider and the Beneficiary.
The respective banks of the Provider and the Beneficiary, The Issuing Bank and The Receiving Bank will both due diligence the Collateral Transfer Agreement, and upon successful completion, the Beneficiary will remit funds to the Provider representing the Contract Fee. The Contract Fee as stipulated in the Agreement and is payment by the Beneficiary for the use of the Bank Guarantee, which is transferred by SWIFT, (“Society for Worldwide Interbank Financial Telecommunications”), from The Issuing Bank to The Receiving Bank utilising the swift dedicate message MT 760.
ICC Uniform Rules for Demand Guarantees, (URDG 758), governs the use of the Demand Bank Guarantee, and as such the wording of the Agreement does impact on the utilisation of the asset, which traditionally the Beneficiary uses as security for loans and lines of credit, alluded to as Credit Guarantee Facilities.
The Providers, usually Hedge Funds, Sovereign Wealth Funds, and Larger Family Offices, form an integral part of the Collateral Transfer Facility, and without whom, there would be no such think. However, these providers have reduced their Contract Fees, enabling the smaller companies in need of credit, to access Credit Guarantee Facilities.
From a global standpoint, more and more companies are turning to this facility to access credit facilities. IntaCapital Swiss, and their increasingly popular Collateral Transfer Facility, are breaking new boundaries by providing access to Credit Guarantee Facilities for companies of all sizes and backgrounds.