Bayrock Services, Ltd

Swift MT-760

 Leased Bank Guarantee.

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BAYROCK SERVICES LTD

Leased Bank Guarantee 

Collateral Transfer encompasses the term of ‘lease ‘or ‘leasing’ as a descriptive term.

 

Swift MT-799 POF

Proof of Funds (POF) is a letter or documentation that certifies that an individual, institution, or corporation has sufficient funds (money) to complete a transaction. 

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01

Standby Letter Of Credit

Looking for a genuine provider to lease an SBLC? Well, look no further. We are experts at handling issuance as well as monetizing of SBLC and we have successfully done this many times over.

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02

Trade Finance

We Are Here to Help You Secure Oil and Gas Financing for Your Business. Bayrock Services and Energy Finance are inextricably linked. We understand the critical role of investment in the oil trade.

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03

BG/SBLC Monetization

BG Monetization is ideal for clients looking to Monetize or create an immediate Recourse loan against a Leased BG. BG Monetization provides recourse funds to the Client shortly after the monetizer…

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BANK GUARANTEE

COLLATERAL TRANSFER

Whilst it is not possible to physically lease a Bank Guarantee (BG) or Standby Letter of Credit (SBLC), it is possible to effectively import these bank instruments (BG’s and SBLCs) on a ‘rental’ basis.

  • Monetization 95% 95%
  • Trade finance 89% 89%
  • business loan 94% 94%

LEASED BANK GUARANTEE

What is a
Leased Bank Guarantee?

Lease Bank Guarantee (BG) or Leasing Standby Letters of Credit (SBLC) are common phrases associated with Collateral Transfer. However, leasing is not really the correct term to use as it is not possible to lease a bank guarantee in this manner.

It is a misnomer. We use the term loosely as its process is exactly that of commercial leasing. In effect, the Provider offers temporary ownership of his assets to the Beneficiary in return for a fee and at the end of the term, the assets revert to the ownership of the Provider. The assets are used to raise specific and non-transferable bank indemnities which the Beneficiary may utilize. It is a misnomer as in effect no leasing takes place. Through a Collateral Transfer Agreement, a Provider will agree to place his assets with a facilitating bank. The bank will charge the asset and will raise a bank indemnity against it in favor of the Beneficiary.

This bank indemnity will commonly be in the form of a Bank Guarantee issued specifically for the purpose of the Beneficiary. These Collateral Transfer (or C/T) facilities are useful for when a business needs to import or create security (collateral) to underpin credit lines or loans, otherwise referred to as a monetization. A Bank Guarantee is a method to secure or guarantee payment. They are commonly used a Credit Facility Guarantees to secure or underpin credit lines, loans, and other forms of credit advancement. Equally, SBLC’s (or Standby Letters of Credit) are used for the same purpose, although a Bank Guarantee is better suited for the job.

Bank Guarantees can be effectively ‘rented’ from a third party known as a ‘Provider’. Providers are often large private equity companies, hedge funds, and wealthy family offices. They enter into Collateral Transfer Agreements with entities that wish to ‘borrow’ or ‘rent’ security in the form of a BG or SBLC. The Provider will pledge his assets (cash, gold, liquid stocks, and shares, etc.) with his bank and instruct the issue of a BG or SBLC to the recipient in return for a Contract Fee (or ‘rental’ payment) on an annual basis. The recipient will indemnify the Provider against loss and will therefore agree to extinguish any loans or credit secured on the Guarantee prior to its expiry. As there is a ‘promise’ to remove any encumbrances or effectively to ‘return the Guarantee at expiry’ it resembles the act of leasing, hence the term ‘leasing of Bank Guarantees’.

The Parties to these transactions are the Provider and the Recipient. Their respective banks and bankers are not a party to the Collateral Transfer Agreement as they will simply “accept instructions” from both parties. The Issuing Bank will act for the Provider and take his instructions, the Recipient Bank will act for the Recipient and further take his instructions. Banks do not directly enter these facilities as the assets underpinning the whole transaction belong to a third party outside the bank (i.e. the Provider). The Recipient Bank may offer to extend credit to the Recipient against the security of the incoming Guarantee. However, the Recipient Bank will have no other role than to receive the Guarantee and accept it as security for any credit granted to the Recipient or Beneficiary of it.

There are several new private banks being formed specifically for collateral management and we may see in the next few years, private banks offering these services by utilizing their own balance sheets to make such commitments. However currently, they are done off the banks’ balance sheet. This means that the Guarantee being issued is not issued on the strength of the bank or the bank’s rating. All Guarantees issued under this manner are for ‘value received’ and therefore the bank’s rating is not so important.

A Recipient Bank may judge the strength of the incoming Guarantee by the Issuing Banks performance on honoring its payments as depicted by their own experiences with that certain bank. As Bank Guarantees cannot be bought or sold or traded in any way, bank ratings are not affirmed to the instrument.

Recipients of Bank Guarantee or indeed SBLC’s have a specific purpose and requirement. The Guarantee is therefore worded for such purpose, i.e. to secure credit or loan or to secure (third party) performance or contractual obligations.

SERVICE DESCRIPTION

If you are an organization involved in trade finance, global finance, project finance, credit enhancement, etc. you have the right choice to use our bank guarantee to secure your business financing. However small businesses may not be able to raise funds from Bank Guarantee investors. This option (BG Collateral Transfer) is a favorable polisher for many institutions. Some rely on this, but most consumers are not aware of this option. We suggest you can utilize a different firm’s cash-backed BG.

To run a perfect stress-free collateral Transfer, the asset holder with merges the joint ownership with the potential creditor. In either case, you have the option to transfer your assets. The account holder will get the same rights of ownership by BG. However, the new owner may only place a lien, monetize, encumber, and use this account for certain security purposes.

The Difference Between Bank Guarantee and Letter of Credit

Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. A bank guarantee, like a letter of credit, guarantees a sum of money to a beneficiary; however, unlike a letter of credit, the sum is only paid if the opposing party does not fulfill the stipulated obligations under the contract. This can be used to insure a buyer or seller from loss or damage due to nonperformance by the other party in a contract.

Bank guarantees protect both parties in a contractual agreement from credit risk. For instance, a construction company and its cement supplier may enter a new contract to build a mall. Both parties may have to issue bank guarantees to prove their financial capability. In a case where the supplier fails to deliver cement within a specified time, the construction company would notify the bank, which then pays the company the amount specified in the bank guarantee.

A Letter of Credit

Sometimes referred to as a documentary credit, a letter of credit acts as a promissory note from a financial institution, usually a bank or credit union. It guarantees a buyer’s payment to a seller or a borrower’s payment to a lender will be received on time and for the full amount. It also states that if the buyer can’t make payment on the purchase, the bank will cover the full or remaining amount owed.

A letter of credit represents an obligation taken on by a bank to make a payment once certain criteria are met. After these terms are completed and confirmed, the bank will transfer the funds. The letter of credit ensures the payment will be made if the services are performed. For example, say China wholesaler receives an order from a new client, a Thailand company. Because the wholesaler has no way of knowing whether this new client can fulfill its payment obligations, it requested a letter of credit be provided in the purchasing contract.

The purchasing company applies for a letter of credit at a bank where it already has funds or a line of credit (LOC). The bank issuing the letter of credit holds payment on behalf of the buyer until it receives confirmation that the goods in the transaction have been shipped. After the goods have been shipped, the bank would pay the wholesaler its due if the terms of the sales contract are met, such as delivery before a certain time or confirmation from the buyer that the goods were received undamaged. The letter of credit substitutes the bank’s credit for that of its client, ensuring correct and timely payment.

Both bank guarantees and letters of credit work to reduce the risk in a business agreement or deal. Parties are more likely to agree to the transaction because they have less liability when a letter of credit or bank guarantee is active. These agreements are particularly important and useful in what would otherwise be risky transactions, such as certain real estate and international trade contracts.

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We are Bayrock Services Limited, a professionally managed, responsible, and ethical company, determined to be widely recognized for our bespoke financial services specially designed for your Bank Guarantee (BG) and Standby Letter of credit (SBLC) lease.