Many companies throughout the world are contacting IntaCapital Swiss, requesting access to loans and lines of credit, referred to as Credit Guarantee Facilities. These are organised through Collateral Transfer and Collateral Transfer Agreements, where one company, referred to as the Provider, leases or rents a Bank Guarantee, to another company referred to as the Beneficiary.

In most cases, a Beneficiary will enter into a Collateral Transfer Agreement for one year, though a Collateral Transfer Agreement can be renewed up to and including seven years. If at the end of year one, the Beneficiary decides to renew the contract/agreement for a second year they must advise IntaCapital Swiss, usually latest one month before the expiry date, so they may get the agreements of both the Provider and the Lender.

However, as mentioned above, a Collateral Transfer Agreement can be agreed for two years and up to seven years. In such cases the Bank Guarantee, will be automatically rolled over for a second year, providing all criteria within the Terms and Conditions of the Collateral Transfer Agreement have been met.

There are different costs and fees associated with a Collateral Transfer Agreement that must be met by the Beneficiary. These include the Provider’s fees, one year’s cost of borrowing, legal fees, booking fees, arrangement and due diligence fees. If the Collateral Transfer Agreement is renewed, or the Bank Guarantee has been contracted for more than one year, fees and costs payable in year two and upwards to seven years, consist of the Provider’s fees, and the cost of borrowing for one year.

It must be pointed out that from year two through to seven, that whilst the Provider’s fees may well stay the same, the cost of one year’s borrowing can change from year to year. Money markets, like all financial markets, are subject to change, thus one years Libor and one year’s Euribor will undoubtedly be different each time a Collateral Transfer Agreement is renewed. Therefore, any increase in the cost of borrowing for one year, will be for the account of the Beneficiary.