WHO ARE PROVIDERS?
Providers or Provider Groups, do not belong to the group of financial institutions classed as “traditional lenders”. They are a geographically diverse group, are highly sophisticated financiers and investors, and can be found trading and investing throughout the world in the global financial markets. The Providers are easily recognisable as companies with access to a large asset base and tend to be Sovereign Wealth Funds, Private Equity Funds, Hedge Funds, Larger Family Offices, and cash rich institutions.
Companies and individuals often beg the question, “why do these companies get involved in Collateral Transfer?” The answer is simple. As with all companies with access to a very large portfolio of assets, some of these assets are either under-performing or the interest rates or coupons are relatively small such as medium or long-term notes.
Providers or provider groups will utilise these under-performing assets as security and issue Standby Letters of Credit, (or more often than not Bank Guarantees), into the Collateral Transfer market, where the return is substantially higher, therefore turning their under-performing assets into profitable items on the balance sheet.