TO LEASE A FINANCIAL INSTRUMENT (BOND or MTN) WITH PURPOSE TO RECEIVE POF/CD
PROCEDURE TO LEASE A FINANCIAL INSTRUMENT (BOND OR MTN) WITH PURPOSE TO RECEIVE PROOF OF FUNDS IN THE FORM OF DEPOSIT CERTIFICATE
- Specifications: In view of the difficulties that Borrowers meet to follow Lender procedure for the leasing of financial instruments (especially for trading or collateral for their credit lines purposes), Lender pointed out the following proposal which give to the Borrower the possibility to lease a BOND or MTN and receive a proof of funds (POF/CD). Lender decided to work with cash backed CD because it is the only way granting traders that the funds are blocked with a CD having maturity date of one year from the issuing date. Application form will bear option (4) to borrow financial instruments (i.e. BOND or MTN) with option to receive Proof of Funds in the form of Certificate of Deposit (CD).
- M.S.L.A. (Global Master Security Lending And Borrowing Agreement): All terms and conditions of G.M.S.L.A. (Global Master Security Lending And Borrowing Agreement) are governed by Lender standard “Guideline and Procedure” to lease BOND/MTN which remains unchanged, with the exception of terms concerning leasing fees payment (refer to point a.) and return of the leased instrument (refer to point b.). Main features of POF/CD transactions are below:
- Payment of Service Fees must be done only by bank backed promissory notes (endorsed per aval by a reputable bank approved by Lender) or by unconditional swift MT103 (attachments
1 and 2).
- Borrower bank will not be requested to take engagement to return financial instrument to Lender’s bank as instrument is not sent to borrower bank but to the Funder’s Company (as a third party)
- FUNDER (the third party of this process) will supply to the HOLDER (the borrower) a POF using cash backed certificate of deposit (attachment 3): two different agreements will be therefore issued i.e.:
‐ Lending Agreement (between the LENDER and the BORROWER)
‐ Discounting Bank Instrument Agreement (between the FUNDER and the HOLDER (the Borrower), bearing references of leasing agreement.
- To comply with lending agreement terms and conditions, the LENDER will authorize the receiving bank (i.e. FUNDER bank), to encumber or pledge the instrument against an official letter, undertaking the obligation to return instrument to the Lender 15 days before his maturity date unencumbered and free of liens.
- The HOLDER (the Borrower), by signing Discounting Bank Instrument Agreement, agree and confirm that certificate of deposit remains on deposit and cannot be collected.
- Discount of leased Bank Instrument: An agreement will be signed between the FUNDER company (third party) ‐ willing and capable to exchange leased financial instrument against a “PROOF OF FUNDS / CD” ‐ and the HOLDER company. The POF/CD will be issued for the amount equal to 90% of leased instrument face value.
- Proof of Funds (POF/CD): POF/CD can be utilized to enter in a Trading Program (through Borrower traders only because Lender don’t offer nor suggest trading service/source), as collateral of a credit line,
- Delivery of POF/CD: CD (attachment 3 at page 6) is issued within 8 working days from discount of the instrument and will be uploaded on Bloomberg Financial Platform with unique reference code which can be checked by Borrower designated bank. Safe keeping receipt (attachment 4 page 7) will be issued together with Certificate of Deposit.
- Internet banking: Lender will provide to Borrower instructions to check their own account by internet banking, where the payments and CD will be entered. When account is already opened, password and code are sent to the client directly by e‐mail.
PROCEDURE TO LEASE A FINANCIAL INSTRUMENT AGAINST POF/CD
SUMMARY OF ABOVE TERMS AND CONDITIONS
- CLIENTS SUBMIT APPLICATION FORM CROSSING OPTION 4 TO BORROW A FINANCIAL INSTRUMENT WITH OPTION TO RECEIVE PROOF OF FUNDS IN THE FORM OF CERTIFICATE OF DEPOSIT (CD).
- APPLICATION FORM MUST BE COMPLETED WITH A DETAILED DESCRIPTION OF THE PROJECT AND THE PASSPORT COPY OF THE AUTHORIZED SIGNATORY.
- CONTRACTS WILL BE SENT FOR SIGNATURE, AND IN THE SAME TIME BORROWER WILL RECEIVE LENDER INVOICE FOR THE EXPENSES DUE TO PERMIT TO THE CALL OPTION EXPENSES TO RESERVE THE BANK INSTRUMENT, AMOUNTING TO:
- 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.
- AFTER RECEIPT OF SIGNED AGREEMENTS AND DEPOSIT OF THE SUM ABOVE DESCRIBED, THE LENDER WILL PROVIDE FOR A CORPORATE PRE‐ADVICE INVOICE WITH ALL DETAILS OF THE BANK INSTRUMENT, EUROCLEAR PRINTOUT, BLOOMBERG (IF AVAILABLE) AND SECURITY CARD OF THE STOCK EXCHANGE MARKET WHERE THE INSTRUMENT IS QUOTED .
- AFTER VERIFICATION, THE BORROWER MUST ARRANGE FOR PAYMENT OF SERVICE FEES WHICH MUST BE DONE ONLY BY BANK BACKED PROMISSORY NOTES (ENDORSED PER AVAL BY A REPUTABLE BANK APPROVED BY LENDER) OR BY UNCONDITIONAL SWIFT MT103 (WIRE TRANSFER) NOT LATER THAN 20 DAYS FROM DATE OF CORPORATE INVOICE
- WHEN PROMISSORY NOTE IS READY AND ENDORSED PER AVAL BY BORROWER BANK, BORROWER MUST SEND IT BY E‐MAIL TO THE LENDER FOR APPROVAL. AFTER LENDER APPROVAL, BORROWER
WILL RECEIVE ALL INSTRUCTION WITH ADDRESS TO WHICH ORIGINAL PROMISSORY NOTE MUST BE SENT.
- UPON RECEIPT OF PAYMENT COVERING SERVICE AND SUCCESSFULLY DUE DILIGENCE ARRANGED BY LENDER COMPLIANCE OFFICER, THE PROCEDURE TO LEASE THE INSTRUMENT, DISCOUNT IT AND SUPPLY THE POF/CD WILL START IMMEDIATELY.
- WITHIN 10 BANKING DAYS FUNDER WILL ISSUE THE CERTIFICATE OF DEPOSIT FOR THE SUM EQUAL TO 90% OF LEASED INSTRUMENT FACE VALUE. BORROWER MUST AGREE AND CONFIRM THAT CERTIFICATE OF DEPOSIT REMAINS ON DEPOSIT AND CANNOT BE TRANSFERRED OR WITHDRAWN.