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What is Collateral Transfer?

 

The layman term is called Leasing of SBLC. Technically there is no leasing takes place in Collateral Transfer. It involves 3 parties:- 

(1) The Collateral Provider

(2) The Receiver (beneficiary) of the collateral.

(3) The collateral issuing bank

 

Why does the Receiver need the Collateral (SBLC/BG)?

 

There are several purposes why he needs the SBLC/BG:

1. For Debt Financing for his project/business. It is effectively a form of security for the lender/bank. There is no wirttten reference "leased" in the Verbiage of the MT760 of the SBLC/BG. The instrument is swift directly to the Receiver's bank.

2. The Receiver may utilize it in credit facility purposes such as Trade Financing to issuing of LC, PB for trade financing. 

3. Trade Program (Wealth Management) by Trader.

 

Who is the Provider?

 

The Provider is often the Collateral Management Firm or Hedge Fund or Private Equity Company.

 

Why does the Provider want to transfer (lease) his Collateral (SBLC/BG)?

 

The Beneficiary of the collateral pays the Collateral Transfer Contract Fee - "rental fee" - at certain percentage of the Collateral (SBLC/BG). It varies from 14% to 18% - any cheaper fee say 6% is likely is scam - depending on the rating of the Issuing Bank and the types of the underlying asset. Cash backed SBLC/BG is more costly.

Usually 2 weeks before the maturity of the Collateral Transfer Conract, the Beneficiary has to return the intrument free of all encumbrances to the Provider.

 

Collateral Transfer (Leasing SBLC)

gallery/flowchart sblc leasing

Our Provider's Offer & Procedure 

TRANSACTION PROCEDURE:

 

OFFER:

 

DESCRIPTION OF INSTRUMENTS

1. INSTRUMENT TYPE

MT760 SBLC, CASH BACKED ICC 600 FORMAT

2. CONTRACT AMOUNT

€000,000,000.00 (XXX MILLION EUROS) WITH EXTENSION

3. FIRST TRANCHE

€10,000,000.00 (TEN MILLION EUROS)

4. SUBSEQUENT TRANCHES

€000,000,000.00 ( TWO HUNDRED FIFTY MILLION EUROS) X 2 TRANCHES

5. CURRENCY

EURO ( € )

6. ISSUING BANK

XX BANK SINGAPORE BRANCH

7. AGE

ONE YEAR AND ONE DAY

8. FUNDING RATE/LEASING FEE

LEASING FEE 16% (inclusive of 3 % swift MT799 Pre-advice fee) + 2% INTEMEDIARY FEE =18% of €000,000,000.00 SBLC CONTRACT AMOUNT

9. DELIVERY MODE

SWIFT MT799 PRE-ADVICE

SWIFT MT799 BANK PAYMENT UNDERTAKING(BPU)

SWIFT MT760 SBLC

10. PAYMENT

BY UNCONDITIONAL MT103 OR WIRE TRANSFER/TT

11. HARD COPY

ORIGINAL HARD COPY BY BANK BONDED COURIER WITHIN 7 BANKING DAYS.

Offer:

DESCRIPTION OF INSTRUMENTS

 

1 INSTRUMENT TYPE: MT760 SBLC, CASH BACKED ICC 600 FORMAT

2. CONTRACT AMOUNT: €X00,000,000.00  (XXX MILLION EUROS) WITH EXTENSION

3. FIRST TRANCHE: €X00,000,000.00 (XXX HUNDRED MILLION EUROS)

4. SUBSEQUENT TRANCHE: €X00,000,000.00 ( XXX  HUNDRED MILLION EUROS) 

5. CURRENCY: EURO ( € )

6. ISSUING BANK: CITIBANK SINGAPORE 

7: AGE: ONE YEAR AND ONE DAY

8. FUNDING RATE/LEASING FEE: LEASING FEE 16% (inclusive of 1% swift MT799 Preadvice fee) + 2%  INTEMEDIARY FEE =18% of  €X00,000,000.00  SBLC CONTRACT AMOUNT

10. DELIVERY MOD: SWIFT MT799 PRE-ADVICE SWIFT MT799 BANK PAYMENT UNDERTAKING(BPU) SWIFT MT760 SBLC

11. PAYMENT: BY UNCONDITIONAL MT103 OR WIRE TRANSFER/TT

12. HARD COPY: ORIGINAL HARD COPY BY BANK BONDED COURIER WITHIN 7 BANKING DAYS.

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