Monetizing Banking Instruments
Monetizing bank instruments is the process of liquidating bank instruments by converting them into cash. We monetize Bank Guarantees (BG’s), Stand-By Letters of Credit (SBLC or SLOC), Bank Draft, Medium Term Notes (MTN’s) and some Long Term Note (LTN) for our clients. To monetize a bank instrument you must be in possession of the BG, SBLC, Bank Draft, MTN or LTN.
PROCESS OF MONETIZATION
SBLC for $ / Euro 100 million or more from any one of the top banks like HSBC UK, Deutsche Bank Germany, RBS London, or Barclays UK are all acceptable for monetization. A list of top banks is available on request.
1. The Client will send us a complete KYC pack with full banking coordinates.
If the SBLC is already issued:
2. The Client will send copies of original SBLC and also ATV to verify on Bank to Bank basis. The SBLC owner must be willing to re-assign the bank instrument in favour of the monetizing group backed by MT760. LTV for non-recourse monetization might be 70% of its face value [subject to confirmation, verification and if it is originating from a top AAA rated bank].
If the SBLC is yet to be issued:
3. If the SBLC is not issued as yet, then the client’s SBLC issuing bank will send a free message MT199 to the designated bank of the monetizer as per desired verbiage. We will need a free message MT199 direct from the issuing bank sent to our designated bank confirming that it is RWA to issue MT760 within the next 2 to 3 days. Then we can issue a contract and offer an agreed percentage of the issued bank instrument.
4. The Monetizer’s Bank will then reply by MT 199 that it will accept the SBLC or bank guarantee and follow instructions of the monetizer as explained in the DOA after positive verification of the bank instrument.
5. The Client will then send the SBLC in favour of the Monetizer and Swift MT 760 to the designated bank account of the Monetizer. The Issuing Bank will also post the hard copy of the Bank draft to the Monetizing bank by bank courier.
6. After positive verification of the SBLC, the Monetizer’s Bank will follow instructions of the monetizer as explained in the DOA and might remit the agreed amount to the designated bank account of The Client by Swift MT 103.
7. At the same time commission will be paid to all named intermediaries as mentioned in the DOA.
Payments of the monetized amount might be made as follows.
1. If this is a leased bank instrument, then the LTV might only be 60 to 70% [minus the agreed commission]
[Note: LTV changes with issuing bank & face value of the instrument]
2. If they own the BG or SBLC and want to sell it then the client might get 70 – 80% [minus the agreed commission]
3. If the client wants to put the monetized amount on trade, the trader might offer 70% [minus the agreed commission] and put the monetized amount on trade. A separate trade agreement sent by the trader will spell what they might earn from such trade.
4. Pay out might be in three instalments:
- 10% of the agreed LTV within first 10 days after positive verification of MT760,
- 40% of the agreed LTV within next 10 days.
- Balance 50% in the last 10 days – total pay-out within 30 days.
OR Total payment can be made in one go after 30 days
General Terms for the Monetization of instruments
We, through a properly established Facility Provider, monetize your instruments: Bank Guarantees, Stand-by Letters Of Credit, Bank Draft, or Medium Term Notes; by giving you a Loan, a loan that in most cases you do not need to pay back, or even if you do, it might be at a two percent interest rate per annum.
The instrument need to be a Bank Guarantees (BG), Stand-By Letters Of Credit (SBLC or SLOC), Bank Draft, Medium Term Notes (MTN), or Long Term Note (LTN) We cannot monetize any other kind of instruments.
The instruments need to have a face value from 10 to 500 million Euros or USD per tranche. Smaller amounts are not enough to justify a Non-Recourse Loan.
We do not buy the instruments, we only give you a Loan. Furthermore, we need to block them for “One Year and One Month” or “Thirteen Months” by an MT-760 SWIFT Message, EUROCLEAR or DTCC. No other method of blocking is accepted.
The bank issuing the instrument must be one of the TOP 100 words Banks.
The documents you send to us, need to be unaltered in any way or form.
The procedure mentioned by us for obtaining a Loan using a BG, SBLC, Bank Draft, LTN or an MTN as collateral has another great advantage to the owner/beneficiary of the instrument: there is no lengthy and sometimes absurd paperwork, like several months of project planning and preparing, submission to several banks for credit committee approval and so on. The monetizer takes care of that in just a few days, and then the owner/beneficiary of the instrument can receive the proceeds of the Loan, and start immediately to invest in his/her projects without having to worry about payments or interest rates, since in most cases there will be nothing to pay back.
To be clear, the instrument gets returned back to the owner/beneficiary after the 13 months had passed, free of any liens or encumbrances of any kind, the instrument’s owner/borrower does not have to pay back the loan itself. Yes, we do give a low LTV when compared to others, but then again, there is nothing to pay back, it is like free money , and you can really use the proceeds of the loan for whatever humanitarian project you might want to use the money for. Of course, if there are any taxes you might need to pay for ANY reason, you will be the only one responsible to pay them too.
The procedure used by us is slightly different from other monetizers: simple and easy. However our procedure cannot be easily bended; you either comply with it and get a Non-Recourse Loan, or, NOT comply with it, and get nothing.
However, do not forget that there is no advance payment or up-front fees of any kind from you to us. Our bank first receives the MT-760 by SWIFT, EUROCLEAR or DTCC Delivery, and then the owner/beneficiary of the instrument/borrower and the intermediaries get paid, all at the same time.
Monetizers bank can reply with a Payment Undertaking after the pre-advise has been received for up to 10% of the face value of the Bank Instrument payable in 5 banking days after confirmation and authentication of the MT-760 in case client needs to pay banking processing fees if is necessary.
Now that you know the kind of instruments we deal with, and the conditions we have for such operations, if you are still interested, here is the procedure: