Collateral Transfer (Lease SBLC,BG)
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.
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
13. HARD COPY: ORIGINAL HARD COPY BY BANK BONDED COURIER WITHIN 7 BANKING DAYS.
Provider and Receiver sign the Deed of Agreement (DOA) which thereby automatically becomes a full recourse commercial contract after Receiver’s application has been accepted by the Provider.
2. Within two banking days after both parties sign the Deed of Agreement:
3. Within the same banking days Provider’s issuing bank of the Standby Letter of Credit will send SWIFT MT-799 pre-advise (APPENDIX-A ) to the Receiver’s bank. Provider forwards a copy of the SWIFT MT799 Pre-Advice to the Receiver’s email.
4. Within Two banking days upon the Receiver’s confirmation of receiving of the MT799 Pre-Advice and has it authenticated, the Receiver shall pay 1% out of 18% (Total SBLC leasing fee inclusive of 2% Agents’ Commission), to the Provider’s nominated bank account, and sends the swift payment copy to the Provider. Additionally, the Receiver shall simultaneously issue a SWIFT MT799 Bank Payment Undertaking (BPU), covering the balance 15% of MT760 face value to the Provider’s designated bank account.
5. Within two banking days after receiving the Swift MT799 bank payment undertaking (APPENDIX-B), the Provider shall send the SBLC via SWIFT MT760 amounting €X00,000,000.00 (XXX HUNDRED MILLION EUROS) (APPENDIX-C) to the Receiver’s designated SBLC receiving account.
6. Upon the Receiver’s confirmation of receipt and authentication of the swift MT760 (SBLC); the Receiver shall then, within two banking days, settle the abovementioned balance 15% of MT760 Face Value by MT103/Telegraphic Transfer to Sender’s bank account, and simultaneously pays the 2% commission to the Agent’s nominated accounts.
7. Within seven banking days after receiving all the fees, amounting 16% of MT760 Face Value; the hard copy of MT760 will be sent to Receiver’s bank by bank-bonded courier.
8. This Deed of Agreement (DOA) is a Full Recourse Commercial Commitment governed by the Law of the jurisdiction of the SBLC issuing bank that is Citi Bank, Singapore Esplanade Branch and the Standard ICC Regulation.
NOTE: PAYMENT OF 1% PREADVICE MT799 SWIFT FEE TO BE PAID AFTER RECEIVER HAS RECEIVED AND VERIFIED THE MT799.