Credit Lines and Monetisation Overview

Bank Guarantees issued under Collateral Transfer facilities may be utilized by Beneficiaries to secure credit lines at their respective banking institutions. Typically, banks are amenable to extending credit against such Bank Guarantees up to 100% of their face value, subject to deductions for accrued interest and applicable fees. In practice, loan-to-value (LTV) ratios generally range between 70% and 80% of the Guarantee’s face amount. The tenor of the credit facility is aligned with the Guarantee’s validity period, commonly spanning 1 to 6 years, and shall not exceed the Guarantee’s expiry.

The Guarantees issued within these frameworks are expressly structured to collateralize credit lines. They conform to the ICC758 protocol and enjoy broad acceptance among international and private banking institutions. Common nomenclature for these instruments includes ‘Letter of Guarantee,’ ‘Credit Facilities Guarantee,’ or ‘Standby Letter of Credit.’

It is critical to clarify that although the Bank Guarantee is procured via the Collateral Transfer mechanism—which some market participants inaccurately refer to as a ‘lease’—this characterization has no bearing on the Guarantee’s integrity or enforceability. The ICC758-compliant wording of the Guarantee does not reference leasing arrangements, and such terminology is inappropriate in this context.

When leveraging the Guarantee to obtain credit or loan facilities, borrowers should anticipate interest charges in addition to the contractual fee (effectively the ‘rental’ fee for the Guarantee). Our observations indicate that international lending rates secured against these high-quality instruments typically approximate 4.00% per annum, although this may vary by jurisdiction and currency denomination.

These facilities are optimally suited for financing horizons up to six years or scenarios where anticipated returns justify higher annual financing costs. Extended tenors beyond six years are generally discouraged due to structural considerations, albeit feasible.

Balkan Capital Assets stands ready to assist clients in securing credit against such guarantees should their incumbent banking partners decline credit extensions. Leveraging established relationships with select banking and private equity institutions, we can facilitate enhanced lending opportunities, subject to additional service fees.

Furthermore, Balkan Capital Assets can facilitate introductions to banking partners for selected clients seeking to establish credit and lending facilities. Prospective clients are encouraged to request detailed proposals.

It is imperative to secure approval for the Bank Guarantee prior to pursuing credit facilities secured by such instruments.