(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': |
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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Cash the BG by
Selling it outright.
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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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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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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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'Cash' the BG by
selling it out right.
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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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Notes
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Banks change their
policies from time to time, and these are guidelines
only.
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The BG can be 'Cashed'
outright, but 'Credit Lines are more desirable
by banks.
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The BG after it is
'Cashed' can be put into a High Yield Roll
Over Program for Investments (Hyrop). The minimum
investment return on a Hyrop to the 'Client' is
approximately fifty (50%) percent.
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Please see What are
"High Yield Roll Over Programs".
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The above examples are
for BG's issued from Major European Banks.
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Hints
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BG's are usually
issued by a corporation as collateral.
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BG's held by
individuals are highly questioned by banks
throughout the world.
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It is generally easier
to raise a 'Credit Line' than convert the instrument
to CASH!
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Fluctuating World
Market Conditions set the pace and determine the
trading value, if any.
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Usually most every
instrument can be converted, however, some are just
Not desirable
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 |
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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