The Essentials when Borrowing and Lending Securities

0 Comments

Once you have negotiated a credit line with your bank, collateral you may need to trigger and draw from that credit line can be arranged on the basis of Borrowing and Lending Securities. A securities dealer will buy, hold and lend the unconditional use of the securities to your bank in the form of an SBLC or Bank Guarantee to serve as your cash collateral for an agreed period of time.

• Your bank will have to be prepared to provide a conditional payment for the borrowing and lending fee during 20 days, after the Securities Borrowing and Lending Agreement is signed. Talk to your bank and see if they agree and support you accordingly.
• You will enter into an agreement with the Facilitator to initiate a Securities Borrowing and Lending Agreement.
• After you have committed to the transaction, and in case your company is not fully qualified placed a reservation and commitment fee, and you have signed the Securities Borrowing and Lending Agreement the securities dealer places a Call Option to buy the securities specifically for your transaction.
• Within 20 days, your bank sends the agreed conditional payment to the securities dealer in line with the Securities Borrowing and Lending Agreement
• This initiates direct communication between banks and starts their Due Diligence on all parties involved.
• If Due Diligence turns out to be positive and to the satisfaction of all parties, the provider’s bank will advise a fully cash backed Bank Guarantee or Standby Letter of Credit via SWIFT MT760.
• Your receiving bank verifies and releases the condition to pay the lending fee.
• You now have the required collateral and can draw cash to start your project.
• 15 days prior of the maturity date of the BG or SBLC you can ask for an extension for another year, or returns the Securities backed BG or SBLC to the investor.

Requirements

If you want to access valid SBLC or BG collateral to back up a credit line, then you will need a bank, or several banks willing to work with you on this. They will have to offer you a credit line you can draw from, once the instrument arrives via SWIFT MT760. The borrowing and lending fee can be paid from that credit and your project can be financed by drawing from that credit line.

You need a bank willing to issue a conditional payment for the borrowing and lending fee. This can be your own bank, the receiving bank, or a third party bank, regardless where your SBLC or BG is going to be stent to, we can offer a solution and structure the transaction accordingly.

Only if you can get this conditional payment confirmation from an acceptable bank, you can get this SBLC or BG. Without this, your transaction will not take off.


Considerations

Basic Essential Requirements:

• Consent to any of the 4 conditional payment options. You will have to get this support from any of your banks to pay for the borrowing and lending fee.

• Your receiving bank will have to be in agreement with the verbiage of the Standby Letter of Credit, or a Bank Guarantee as available to serve as your collateral for the agreed period of time.

For selective clients, there may be a Solution for any of these issues:

• If you may not want to disclose full details of this transaction to your receiving bank
• If you do not want to fully disclose that your collateral is a result from a borrowing and lending transaction
• If you do not want to disclose that the guarantee instrument is to be returned 15 days prior maturity
• If you require a SWIFT MT799 Pre-Advice to get your transaction started.

Leave a Reply

Your email address will not be published. Required fields are marked *