Renewing Collateral Transfer Agreements

Collateral Transfer Agreements, are mostly utilised by companies unable to obtain credit facilities from traditional financiers such as their own banks, thus they apply to one of Europe’s leading specialists in this field, IntaCapital Swiss. A Collateral Transfer Agreement, is signed by two parties, where one company, designated the Provider, leases a Bank Guarantee, to another company, referred to as the Beneficiary.

For more information on the Provider, please see “Who Are Providers And What Are Their Benefits From Leasing Bank Guarantees”.

A Collateral Transfer Agreement can be renewed automatically as companies can contract for a Bank Guarantee, for up to seven years, providing all the Terms and Conditions are adhered to. If, however, the Collateral Transfer Agreement is for one year only, and the Beneficiary decides to renew the contract for a second year, then they must advise IntaCapital Swiss no later than one month before the expiry date, allowing them time to gain the approval of both the Lender and the Provider.

When the Beneficiary signs a Collateral Transfer Agreement, they are liable for costs as detailed within the agreement, and these costs relate to, the Provider’s fees, the cost of borrowing for one year, arrangement fees, booking fees, due diligence and legal fees. In years two to seven, the Beneficiary is only liable for the Provider’s fee, and one year’s cost of borrowing.

It is relevant to note that the Provider’s fees tend to remain fairly static, however the cost of one year’s borrowing can vary from year to year. It is common knowledge that money markets fluctuate like all financial markets, and any impact on one-year Libor or one-year Euribor which results in the cost of borrowing increasing, then these costs will be borne by the Beneficiary.