GENERAL INFORMATION

 

TO BORROW FINANCIAL INSTRUMENTS

 

GENERAL POSSIBILITIES AND PROCEDURES                                                                                   

 

Bank Instruments, as specified and agreed upon by contract/agreement, are assigned in individual or corporate name and are primarily used for provision of a project, commercial endeavours, balance sheet and credit enhancement. The Bank Instrument is made available as an enhancement instrument only.

Applicants/Borrowers may assign the rights to use the Instrument, however, its ownership will not be transferred. It is not permitted to sell or pledge the Instrument. If Applicants/Borrowers wish to pledge the Instrument, arrangements can be made with the banks congruent with banking rules and regulations during any time of the validity of the Bank Instrument. If Applicants/Borrowers will use borrowed instrument as collateral, borrower’s Bank must undertake the irrevocable commitment to return leased instrument unencumbered, free and clear of any debts or claim.

Within the purposes of bank instruments lending program,  Lenders offer following services, all available WITH or WITHOUT pre­advice:

  • Application to borrow seasoned financial instruments (i.e.: BOND/MTN);
  • Application to borrow seasoned financial instruments (i.e.: BOND/MTN) with option to receive fresh cut BG or SBLC issued by Lender’s bank which purchased bank  instrument (BOND/MTN) borrowed by client;
  • Application to borrow seasoned financial instruments (i.e.: BOND/MTN) with option to receive a Proof of  Funds/Certificate of Deposit  (POF/CD).

G.M.S.L.A. (Global Master Security Lending And Borrowing Agreement) is valid for 30 calendar days from its issuing date. The contractual documentation is negotiated in line with Applicant/Borrower’s specific requirements. Once the parties have duly executed a Contract/Agreement, parties or their representative are only legal and authorized entities allowed to handle the Lending transaction, to receive the documents and to maintain all communication.

 

Lending Agreement can be issued for one only  instrument (or tranche) and Borrower can have one agreement at a time. Once  first agreement has been performed, Lender can accept  another application form for another instrument

 

Lender are not willing to enter any joint venture arrangements with Borrower or change any of procedure terms and conditions. 

  1. Specifications: Bank Instruments (list of which is supplied by lender) are issued by major international banks and assigned directly in the Borrower name. Applicant/Borrower have to be professional and familiar of how to use bank instruments. Lender do not educate or provide any advise as Borrowers can incorporate such financial confirmation into their financial plans.
  2. Type of Instrument and re­delivery to Lender: Depending on availability, the Bank Instrument/Collateral is offered in the form of Certificate of Debt: which can be MTN, BONDS, EUROPAPERS, COMMERCIAL PAPERS, BG, SBLC, CD/POF. Lending period is 1 (one) year plus one day from MT760 date. Applicant/Borrower must return the bank instrument unencumbered to the Lender 15 days before its maturity date; it is possible to extend, with 15 pre‐advise days, the leasing period, yearly and for maximum 5 (five) years (yearly service fees remain the same of first year).
  3. Minimum/maximum face value amount availability: Transactions for minimum face value amount of US$ or EUR 10,000,000.00 are acceptable immediately, subject to approval of the Applicant/Borrower application form. Lender always include in the list some instrument having face value amount lower than ten million (to note that for these bank instruments service fees must be paid by unconditional wire transfer). Applicant/Borrower who need  amount lower than ten million, must select that instrument in the list and cannot have a tranche of higher face value amount bank instrument.
  4. List of financial instruments supplied by lender: it is monthly updated and includes full details of the bank instruments (issuing bank name, currency, face value amount available at the date of the list, yearly leasing fees rate, maturity date and ISIN Code). Applicant/Borrower can select the instrument (for full face value amount or a tranche of it) which they like to borrow and note that on receipt of the application form, Lender will verify availability of selected bank instrument because contract/agreement is issued on a first come first is served basis. Lender can definitively confirm instrument availability only after the call option. In case selected bank instrument is no more available, Lenders will offer another  instrument at similar rate.
  5. Security Lending and Borrowing Agreement: The contractual documentation is negotiated in the line with Applicant/Borrower specific requirements. Once the parties have duly executed Contract/Agreement, the Applicant/Borrower is only legal and authorized entity, which is allowed to handle the lending transaction, to receive the documents and to maintain  communication with the Lender or their representative.
  6. Commencement of transaction: Upon receipt and acceptance of Application Form, Lender will send Lending Agreement for signature, issued according to Application form requests and in the same time Applicant/Borrower will receive the invoice covering bank expenses  due to permit to cover the call option settlement fees to reserve bank instrument, in the following amounts:

 

  • bank instruments with face value amount up to 500 million: EUR 20,000.00
  • bank instruments with face value amount from 501 to 999 million: EUR  28,000.00
  • bank instruments with face value amount from 1 billion: EUR 32,500.00

 

Currency must be in euro no matter what currency the instrument is in.

 

NOTE: ABOVE MENTIONED MONEY WILL BE REFUNDED AFTER SUCCESSFULLY CLOSING THE TRANSACTION OR BORROWERS HAVE THE RIGHT TO DEDUCT IT  WHEN ARRANGE FOR SERVICE  FEES PAYMENT.

  1. Why Lender ask clients to pay call option: On many occasions Lender are asked why a client should pay a call option deposit a/o if he can make a deferred payment or add it to the service fee plus many other requests. This should not be interpreted as an upfront fee. This is a real costs that Lender must pay. The deposit is contractually guaranteed to be returned by the Lender upon successful completion of the transaction. As per below explanation, when Lenders receive a request to borrow a bank instrument they are obliged to take out an option for which  fees must be paid; if for some reason the Borrower did not precede with the lending process the Lender would be out of pocket. It is therefore essential that anyone wanting to borrow a bank instrument must pay a Call Option fees which are either refundable on completion of the transaction or can be deducted by Borrowers when they arrange for payment of service
  2. What is a call option: In finance options are types of contracts, including and, where the future payoffs to the buyer and seller of the contract are determined by the price of another security, such as a common stock. More specifically, a call option is an agreement in which the buyer (holder) has the right (but not the obligation) to buy an asset at a set price (x y) and the seller has the obligation to honor the terms of the contract. A put option is an agreement in which the buyer has the right (but not the obligation) to exercise by selling an asset at the strike price on or before a future date and the seller has the obligation to honor the terms of the contract. Since the option gives the buyer a right and the seller an obligation, the buyer pays the option premium to the seller. The clearing houses guarantee that an assigned seller will fulfill his obligation if the option is exercised.  
  3. Pre­advice (it is an option in the leasing transaction): At request of the Borrower, Lender is ready, willing and available to organize the delivery of a Pre‐Advice which can be sent as follows:

 

  • By Swift MT799/MT999 to the Borrower’s designated receiving bank at the cost of € 90,000. Swift will be issued by an “advising bank” which is not MT760 issuing bank, that because at this step of leasing process, Lender have not yet purchased the bank instrument (it will be purchased after receipt of leasing fees payment and lender cannot know in advance which is their bank charged to perform the  transaction).
  • By certified email sent by lender compliance officer to the Bo rower’s desr ignated receiving bank  at the cost of EURO 5,000. 3 NOTES:
    1. WHEN PRE‐ADVICE IS ISSUED, INSTRUMENT RESERVATION (CALL OPTION) IS EXTENDED BY LENDER FOR FURTHER 30 CALENDAR DAYS FROM THE DATE OF PRE‐ADVICE SWIFT OR CERTIFIED E‐MAIL.
    2. ABOVE MENTIONED MONEY WILL BE REFUNDED AFTER SUCCESSFULLY CLOSING THE TRANSACTION OR BORROWERS HAVE THE RIGHT TO DEDUCT IT WHEN ARRANGE FOR LEASING/SERVICE  FEES PAYMENT.
  1. Delivery of documents: After signature of lending agreement and wire transfer of the call option fees in the above agreed mentioned amount, within 48 hours after receipt of funds on the Lending Manager Account, call option of the bank instrument will be arranged by the Clearing and Settlement Company (Lending Manager). After that Lender will send their Corporate Pre‐advice of Invoice with all details of the Bank Instrument, Corporate Deed of Assignment, Bond Power, Euroclear, Bloomberg Printout and Security Card of the Stock Exchange market where the instrument is quoted, Prospectus of  Issuing Program of the Instrument (if available), to permit the designated Borrower’s Bank Officer to check and authenticate bank instrument.
  2. Payment of Fees: Credit Enhancement Bank Instrument is available at service fees stated on updated list of instruments i.e. ….% of Face Value due to the lender for the duration of one Year (excluded any interest or coupons) plus 2.00% commission due to intermediaries group. Only below payment terms and conditions are allowed. No payment from profits that applicant/borrower expect in the future through trading/pla form or t loans can be accepted.

 

  • Service Fees: Borrower must provide for the payment of service a/o leasing fees, not later than 20 calendar days from call option date, according to following terms  (which drafts are attached and cannot be amended by Borrower or their bank):
    1. conditional ICPO (Irrevocable Corporate Pay Order) endorsed by an acceptable borrower bank (attachment 1) or
    2. unconditional bank backed Promissory Notes (attachment 2), with expiring date from 180 to 270

        days as negotiated between the parties (having the endorsement per aval of an acceptable bank) or                c.  conditional swift MT103 or MT700 (attachments 3 and 4) 

 

  • Intermediary Fees: Intermediaries are allowed to receive a commission (International standard rate is 2%) which is not included in the service/leasing fees rate. To this purpose Lender attached to application form draft the FPA for their use and purpose. Lender authorized representative do not participate on the brokers/intermediaries  
  1. Assignment of bank instrument: Upon successfully due diligence arranged by Lender compliance officer on receipt of payment covering service fees, Lender will send swift MT 760 (attachment 5) on receipt of which  conditional payment must be unblocked  and released to Lender.
  2. Bank communication: Lender and Borrower banks will not communicate and will not deal directly with each other unless all parties of the transaction has given written authorization. There shall be total freedom of communication between the parties of the contract at all times. Borrower Banks must be a bank listed in the International Bankers Almanac. If Borrower banks are not registered/listed in the Swift System as required, the Borrower must introduce a Closing Bank (internationally recognized and registered within the Bankers Almanac), which must have full knowledge of the lending transaction signed by and between Lender and Borrower, for the receipt of the Pre‐Advice/due diligence and for any further bank‐to‐bank communication,
  3. Knowledgeable and awareness of the bankers: Borrower Bank Officer(s), provided that the Borrower Closing bank is qualified as per the above, must be fully aware and knowledgeable of the on going lending transaction. This means that at any specific time, when a Bank‐to‐Bank communication will be established, between the Borrower Bank and the Lender Bank, whether for the due diligence carried out by lender compliance officer, for Pre‐Advice transfer, for bank Instrument transfer, Borrower Closing Bank Officers will be in the position to fully approve the receipt of the Instrument in favour of the Borrower, as well as to confirm payment for this Instrument and take engagement to return back by swift ban instrument to he Len er ank  k t d b 15 days before its maturity date unencumbered and free on liens.
  4. Penalty and expenses for call option extension: Borrower can ask to Lender for further 30 days extension of lending agreement validity at least three working days before call option expiring date. If Lender accept Borrower request, an Amendment will be issued including invoice for the amount of EUR 15,000. Amendment will be in place upon receipt of  swift wire transfer funds on account of designated appointed Clearing and Settlement Company (Lending Manager) to the bank coordinates stated on invoice above mentioned invoice, at least one days before original call option expiring date.

After c ll option extension, Lender will send to the Borrower updated documents and print out. The 30 days a extens oi n begins on the first day this agreement expires.

 

NOTE: ABOVE MENTIONED MONEY WILL BE REFUNDED AFTER SUCCESSFULLY CLOSING THE TRANSACTION OR BORROWERS

HAVE THE RIGHT TO DEDUCT IT  WHEN ARRANGE FOR SERVICE  FEES PAYMENT.

 

  1. Performance bond to cover risk of not return instrument (it is an option in the leasing transaction): A performance  bond may be purchased to avoid a bank undertaking to return instrument. When Borrower  require this service, must send a written request to Lender. The performance bond will cost 2,50% of face value and will be issued through a Lender’s company. The premium must be paid by unconditional swift wire transfer MT103 prior to delivery of the instrument and requested before lender arrange for due diligence. Borrower may arrange through their own insurance company and in that case must submit a copy of the policy along with the application for approval. Advantages for Borrower are that in the due diligence function, Borrower’s bank will not be requested to take irrevocable engagement to return the Bank Instrument in accordance with Lending Agreement terms, 15 calendar days before maturity, however the purchase of insurance coverage does not effect in anyway or manner Borrower obligations to return the instrument at the end of said leasing period unencumbered and free of all liens.

 

 

STEP ­BY ­STEP SUMMARY  OF ABOVE TERMS AND CONDITIONS

 

  • BORROWER SEND A SIMPLE APPLICATION TO REQUEST THE LEASING OF THE INSTRUMENT INCLUDING A DETAILED DESCRIPTION OF THE PROJECT, OR PURPOSE FOR WHICH THE BANK INSTRUMENT IS BEING BORROWED AND SIGNATORY PASSPORT COPY.

 

  • LENDING AGREEMENT CAN BE ISSUED FOR ONE ONLY INSTRUMENT (OR TRANCHE) AND BORROWER CAN HAVE ONE AGREEMENT AT A TIME. ONCE  FIRST AGREEMENT HAS BEEN PERFORMED, LENDER CAN ACCEPT  ANOTHER APPLICATION FORM FOR ANOTHER INSTRUMENT.

 

  • UPON ACCEPTANCE OF APPLICATION FORM, LENDER WILL SEND LENDING AGREEMENT WHICH SHOULD BE RETURNED SIGNED BY BORROWER TOGETHER WIRE COPY FOR THE AMOUNT STATED ON INVOICE (COVERING CALL OPTION, ADMINISTRATIVE AND RESERVATION COSTS) ATTACHED TO

LENDING AGREEMENT. TO NOTE THAT INVOICE IS IN EURO NO MATTER WHAT CURRENCY THE INSTRUMENT IS IN. THIS MONEY WILL BE REFUNDED AFTER SUCCESSFULLY CLOSING THE TRANSACTION. BORROWER HAS THE RIGHT ALSO TO DEDUCT THE ABOVE MENTIONED AMOUNT FROM THE SE VICE FEES TOTAL AMOUNT R

 

  • AFTER CALL OPTION, LENDER WILL SEND THEIR CORPORATE PRE‐ADVICE OF INVOICE WITH ALL DETAILS OF THE BANK INSTRUMENT, CORPORATE DEED OF ASSIGNMENT, BOND POWER, EUROCLEAR, BLOOMBERG PRINTOUT AND SECURITY CARD OF THE STOCK EXCHANGE MARKET WHERE THE INSTRUMENT IS QUOTED, PROSPECTUS OF THE ISSUING PROGRAM OF THE INSTRUMENT (IF AVAILABLE), TO PERMIT THE BORROWER’S BANKERS TO VERIFY BANK INSTRUMENT.

 

  • AFTER VERIFICATION, BORROWER MUST PROVIDE FOR SERVICE FEES PAYMENT AS PER TERMS OFFERED BY LENDER (DRAFTS OF ALLOWED PAYMENT TERMS ARE ATTACHED TO LENDING AGREEMENT) NOT LATER THAN 20 DAYS FROM CALL OPTION DATE. BORROWERS HAVE THE POSSIBILITY TO EXTEND THE DURATION OF THE CONTRACT FOR FURTHER 30 DAYS PERIOD WHICH BEGINS ON THE FIRST DAY THIS AGREEMENT EXPIRES.

 

  • THE BORROWER HAS THE POSSIBILITY TO EXTEND THE DURATION OF THE CONTRACT FOR FURTHER 30 CALENDAR DAYS, TRANSFERRING EURO 15,000 TO THE LENDING MANAGER. THE NEXT 30 DAYS EXTENSION BEGINS ON THE FIRST DAY THIS AGREEMENT EXPIRES.

 

  • AFTER RECEIPT OF THE CONDITIONAL PAYMENT AND SUCCESSFULLY DUE DILIGENCE, LENDER WILL PURCHASE BANK INSTRUMENT AND TRANSFER IT BY SWIFT MT 760 TO THE BORROWER DESIGNATED BANK ACCOUNT, TRANSFERRING ALSO ALL THE RIGHT TO USE IT. THE CONDITIONED PAYMENT WILL BE AT THAT TIME UNBLOCKED.

 

  • AFTER RECEIPT OF THE INSTRUMENT BY MT760, BORROWER’S BANK HAS 8 HOURS TIME TO UNBLOCK THE LEASING FEES CONDITIONAL PAYMENT.

 

  • 15 DAYS BEFORE MATURITY DATE OF BANK INSTRUMENT, BORROWER’S BANK MUST RETURN BACK THE INSTRUMENT BY SWIFT TO THE LENDER’S BANK UNENCUMBERED AND FREE OF LIENS.

 

  • PERFORMANCE BOND MAY BE PURCHASED TO AVOID A BANK UNDERTAKING TO RETURN INSTRUMENT.

AT THIS STAGE LENDER HAVE PROVIDED THE COMPLETE SERVICE APPLICANTS/BORROWERS HAVE ORDERED. THIS IS THE END OF THE TRANSACTION.