I have had a number of emails asking whether a leased instrument can be used for asset management. The answer is clearly NO.
Many foundations and Charities do use "Bank Guarantees" to enter AAM situations. These guarantees are not leased and in fact they are owned by the applicant and fully callable. These type of guarantee are designed for insuring a credit facility that an applicant has already secured
These guarantees are called First Demand Bank Guarantees (Bond). They are issued by specialist insurers but have "Cut Throughs" to major banking institutions who underpin them. Many majors companies like AIG have now reduce this type of guarantee mainly due to the losses in CMO markets.
However there still insurers out there willing to underpin a credit line if they know that monies are to be traded with a regulated asset management company. This type of guarantee is at present the life blood of some charities and foundations.
The cost is very high. No the average policy will be around 3-4% if you need to get a "A" rated wrap on it add another 1% max to it. Anymore than 6% you know the brokers are getting greedy.
We have to pay upfront. No. You can enter into what is called a credit cross over agreement whereby your bank gives an undertaking with the insurer to pay. There is alot involved backstage as it were but this way of financing large projects is safe and secure. Plus you have the added knowledge that any asset management company that the insurer is willing to support has a good track record of performance.
If you want to ask further pls email
seboleg@gmail.com BE WISE BE SAFE
