If you are interested to obtain a valid fully verifiable Bank Guarantee instrument from a third party to trigger a credit line at your own bank, then here is your solution!
Let me explain why this is probably the only way that you can expect a third party to provide you with a valid, fully verifiable cash backed, divisible and assignable Bank Guarantee or Standby Letter of Credit. For this, you should know how we operate and generate these financial instruments.
The background does not really have to concern you if you seek to borrow a BG or SBLC through us. But the information is useful if you want to understand how we generate these financial instruments and why our procedures are fixed the way they are.
So here is the background of the deal!
We have a client base of High Net Worth Investors who buy highly rated bonds and securities. The higher the rating of a bond, the lower is the yield of a bond obviously. Lower risk for an investor usually results in lower yields. Through a borrowing and lending transaction, we can however leverage the investors’ annual return! An investor buys specific securities and lends them out to a borrower, for example to you, in the format of an SBLC or BG for an agreed upon period of time. You pay a lending fee to the investor. This leverages the investor’s Return of Investment significantly. A bond with an annual yield of 4% can now return probably 12% or more per annum.
Based on the purchase of clearly identified highly rated bonds, MTNs and other securities through an investor and a Securities Borrowing and Lending Agreement with you, your collateral instrument is generated and transmitted via SWIFT MT760 in the format of an SBLC or BG, to your receiving bank. There it can be used as a valid and verifiable form of collateral which you can use in any unrestricted way during the agreed upon lending term.
Our procedures match exactly this scenario. With our Business Support Contract, you start the assessment process. Once you can be accepted as a qualified borrower, specific securities are identified for your transaction and proposed to our investors. Once an investor commits to purchase these securities into his portfolio and for your transaction, the Securities Borrowing and Lending Agreement is issued to lend these clearly identified securities to you.
To enable this process, the securities have to be reserved for the transaction for 20 days. Since these securities will specifically be purchased to enable your transaction, to emit your SBLC or BG, the deal has to be fixed and these clearly identified securities into the millions will have to be firmly reserved through the payment of a call option. Through the Securities Borrowing and Lending Agreement, the investor is committed to buy these securities and you will have to commit to borrow exactly these securities and pay for the agreed lending fee within 20 days. Once the Securities Borrowing and Lending Agreement is issued for these clearly identified securities, your bank will have to come up with the agreed payment instrument – within 20 days, and transmit the conditional payment as to the terms and instructions of the Securities Borrowing and Lending Agreement.
Once your conditional payment is received and verified directly between banks, the investor will buy the agreed securities for your transaction and send the SBLC or BG to your bank. Your receiving bank will have all the background information and can verify the instrument to be not just divisible and assignable, but also fully cash backed through the investor’s cash and generated on the back of the agreed securities. One received and verified, your bank will release the conditional payment, for you to get the benefit of the Borrowing and Lending transaction for the agreed upon period of time. Prior to the expiry date, you return the instrument unencumbered, or you extend the Borrowing and Lending Agreement for another year on the same terms as agreed for the initial period.
Hope this has provided you with a better understanding of why this is probably the only way that you can expect a third party to provide you with a valid, fully verifiable cash backed, divisible and assignable Bank Guarantee or Standby Letter of Credit, and why our terms cannot be modified in any way.
This is the only way we can guarantee to perform and provide you with a Prime Bank Guarantee instrument sent to your own bank.
Since it is fully cash backed, divisible and assignable, you can use this instrument also in a back to back transaction to issue your own instruments on the back of our instrument. This can leverage your own financial possibilities.
If you would like to discuss any of these options for your immediate business, please use the reply form, or call 00353860325153
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