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Redeeming
for cash or raising a credit line
The "Discounting" of
Prime Bank Guarantees (BG's) is based on the following criteria and generally accepted conditions:
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Depends on the type of BG, i.e. Face Value (zero coupon); Term Interest Bearing; One Year and One Day; 5, 10, 15, 20
Year; etc.
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The preferred BG type is One Year and One Day, but virtually any type of BG is acceptable. The conversion value
(Net Cash to Client) may vary dramatically. |
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Bank Guarantees are defined as those issued by a Major Bank in Europe.
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All BG's must be in US Dollars. |
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All transaction amounts must be in or converted to US Dollars only.
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It must be fully understood, the BG is sold outright for a "Cash Value". |
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The
following are some examples of 'Converting a BG to Workable CASH':
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*Example
Assumes
the Bank Guarantee (BG) is the One Year and One Day Type for 1.03 to 1.08 (103 to 108 percent) and issued from a top European
Bank.
The following in principal is how the discounting works:
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1-Cash the BG by Selling it outright. |
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2-The BG can be discounted at 10+6 percent (10 percent par face value plus the 6 percent interest). Therefore,
lets assume 100 million dollars plus the back end of 6 percent maturity value on the face BG amount. This
would make the transaction amount have an estimated cash value of 90 Million US Dollars to the client. |
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3-The Actual Cash Value on every 100 Million US Dollars (90 Million) would be paid in full at time of transaction and
selling of the BG for the full face amount of 100 Million which matures at 106 percent in one year and one day. |
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4-The 'Full Cash Amount' is then paid to the client through a Bank-to-Bank wire transfer.
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*Example
Assumes
the bank Guarantee (BG) is for 65 Million US Dollars, interest bearing that matures in 20 years.
The following in principal is how the discounting works:
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1-Cash the BG by selling it out right. |
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2-The 'BG' can be discounted from 60% to 85% depending on market conditions. Therefore, a 65 million dollar BG
is worth in 'CASH' 39 to 55 million. |
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The 'Full Cash Amount' is then paid to the client through a Bank-to-Bank wire transfer.
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Hints
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1-BG's are usually issued by a corporation as collateral. |
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2-BG's held by individuals are highly questioned by banks throughout the world. |
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3-It is generally easier to raise a 'Credit Line' than convert the instrument to CASH! |
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4-Fluctuating World Market Conditions set the pace and determine the trading value, if any. |
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5-Usually most every instrument can be converted, however, some are just Not desirable
6-Trading Instruments on
the current World Market. |
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Substantiated "Documentation' is needed for this type of transaction.
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The following bank guarantees
are very difficult to do at the present, and only a 'Credit Line' could be raised:
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Any BG issued from any Indonesian Bank |
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Any BG issued from any Thailand Bank |
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Any BG issued from any Philippine Bank |
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Any BG issued from any Malaysian Bank |
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Any
BG held by an Individual in lieu of a company, trust, corporation, endowment, pension fund, or nonprofit entity
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The following bank guarantees
are not currently tradable:
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BG's issued from Russia |
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BG's issued from Vietnam |
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BG's issued from Cambodia |
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BG's issued from Burma |
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BG's Issued from Laos |
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