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Can a Bank Guarantee be Treated for a Discount?
Post 1 of 8
highcourt1
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Dear Sir,

Whether a Bank Guarantee can be a transferable security?  Can it be treated for a discount?

Thanks,

Mirza

Award 10 MVPs ( What's this? )for the best answer.
04 Jun 2008 04:24
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Post 2 of 8
Aussie
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Broadly speaking in commercial law, the answer is yes to both questions but there are many forms of bank guarantee most of which are not transferable.

However, even instruments such as Travellers Cheques are, in effect, a bank guarantee.

You need to specify the exact sort of bank guarantee you have in mind.

[em1]

04 Jun 2008 05:33
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Post 3 of 8
David Shen
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Quoting from [highcourt1]:

Dear Sir,

Whether a Bank Guarantee can be a transferable security?  Can it be treated for a discount?

Thanks,

Mirza

It depends, according to the credit of the bank and the national management of the currency policy. Generally speaking, bank credit is more aliable than company credit.

David Shen

04 Jun 2008 18:47
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Post 4 of 8
highcourt1
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Quoting from [highcourt1]:

Dear Sir,

Whether a Bank Guarantee can be a transferable security?  Can it be treated for a discount?

Thanks,

Mirza


Thanks to both , Mr. Aussie & gentelman from canada for their candid reply.  The exact proposition is whether it is lawful where a company invited the wholesale dealers and required bank guarantee for the performance of their contract.  The wholesale dealer furnished the required bank guarantee to the company, now can the company further pledge it to some other party/financial institution to raise its funds?  bundle of thanks

05 Jun 2008 05:45
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Post 5 of 8
Aussie
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Mirza, I assume you are referring to a contract for the future manufacture of goods or supply of services (as distinct from sale of existing goods).
 
The bank guarantee cannot be used as sole security for present day borrowing by the company because the guarantee of itself is not a tangible present day asset. The guarantee merely guarantees a future income stream contingent on the company performing its part of the bargain for the wholesalers at some future date.
 
An external financier might fund the company by way of fixed and floating charges over the company complete with assignment of the future funds to be paid under the bank guarantee. In other words, it is quite lawful to assign existing or future proceeds to a third party financier but that's about the exent of how you can deal with the bank guarantee.
 
However, the financier is still at substantial risk as it has no control over whether the company could actually perform its part of the contract which of course is necessary before monies actually become due and payable under the contract. At the end of the day it boils down to whether a financier is confident that the company could perform being a matter of track record and substance of the company itself. 
 
So, the short answer to your question is "no".
 
However, once the company performed its contract, it could quite readily sell the resulting debt because that debt is bank guaranteed.
 
Incidently, manufacturing or service contracts (if such is what you are talking about) are best funded by upfront cash deposits followed by a series of progress payments against work actually done but it is difficult to advise here not knowing all the circumstances. 
 
[em1] 
05 Jun 2008 16:42
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Post 6 of 8
bavaria
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Quoting from [highcourt1]:

Dear Sir,

Whether a Bank Guarantee can be a transferable security?  Can it be treated for a discount?

Thanks,

Mirza



The function of a bankguarantee is to give security to the seller that he will get paid provided he has done his part of the deal correctly. If the seller then fails to pay, for whatever reason, then the guarantee will be called upon.

The bankguarantee is only for the seller and to my knowledge is not transferable.

But there might be numerous bankguarantees, better you ask your bank for your specific case what is the best way to go.

01 Jul 2008 06:21
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Post 7 of 8
aggof1
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YES it can be discounted  however it depends on the verbage used in the Bnak Guarantee.
Quoting from [highcourt1]:

Dear Sir,

Whether a Bank Guarantee can be a transferable security?  Can it be treated for a discount?

Thanks,

Mirza


05 Jul 2008 10:38
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Post 8 of 8
srishaamassociates
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DEAR SIR,

HAVE A NICE DAY,

THANKS FOR MAIL ,

FIRST WE HAVE UCC 1 & 2 US NOTES OF M/S,FORD MOTORS, USA, 500 M USD ,DIRECT MANDATE THEY ARE  IN NOW LONDON ON 11 - 7 - 2009 . THIS INSTRUMENT CAN DISSCOUNT IT OR USING COLLATREL PURPOSE OR TRADING ETC.

SECOND WE HAVING BG FOR 30 M USD FROM UK BASED BANK, PROVIDED BUYER CAN PRODUCE BG VERIBAGE COPY APPROVED BY THEIR BANK,LOI WITH ALL BANK CORDINATES AND HAVING CREDIT LINE FOR 30 M USD LETTER FROM BANK,50/50 SHARE BASICS.

ANOTHER WE CAN ARRANGE FRES CUT LEASED BG FROM TOP EURPOEAN BANKS.

KINDLY SEND YOUR FEED BACK ASAP

OUR MAIL ID -srishaamassociates@aol.in

THANKING YOU,

REGARDS

MURALI
16 Jun 2009 22:52
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