Renewing Collateral Transfer Facilities

A Collateral Transfer Agreement is a renewable contract between two parties, the of owner of Bank Guarantees known as the Provider, and the recipient of the Bank Guarantee, known as the Beneficiary. IntaCapital Swiss has become renown for Collateral Transfer and Collateral Transfer Agreements, and is where the Beneficiary will be able to lease a Bank Guarantee from the Provider.

Within the Terms and Conditions of a Collateral Transfer Agreement, the Beneficiary may lease a Bank Guarantee from one year up to and including seven years. It is usual for a Bank Guarantee to be leased for just a single year, but if the Beneficiary needs to renew the contract for a second year, they must inform IntaCapital Swiss at least a month in advance of the expiry date, so they may obtain the agreement of the Provider and the Lender.

When a Bank Guarantee is booked for two years or more, the Collateral Transfer Agreement will renew automatically subject to the Terms and Conditions contained therein.

There are a number of costs and fees for the Beneficiary’s account in the first year and these are broken down into, one year’s cost of borrowing, the Provider’s fees, booking fees due diligence fees, legal and arrangement fees. However, in the second year and subsequent years, the Beneficiary will only have to bear the cost of the Provider’s fees and the cost of borrowing for one year.

The cost to the Beneficiary can fluctuate year on year, and though the Provider’s fees can be fairly static, the cost of borrowing is subject change due to uncertainty in the one-year Libor and one-year Euribor markets. If the cost of borrowing increases, then the increase will be borne by the Beneficiary.