Utilizing foreign fixed deposits (CD's) for credit lines

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Utilizing foreign fixed deposits (CD's) for credit lines

The client can utilize their Certificates of Deposit (CD's) as "Proof of Funds" and can then use these against a 'Line of Credit'. The line of credit is generally eighty (80%) percent of the face amount of the CD, but can vary with each transaction.

We need to caution the client in using these, especially on large sums of money. This requires pre arrangement with a large Forex rated international bank. The CD's would have to be blocked, say for five (5) years. The issuing bank would then have to agree in advance that a line of credit would be drawn against the CDs, say for eighty (80%) percent of the face value.

In some cases, a second bank may be required, say in Europe, at which time a line of credit is drawn against the 80 percent, again for 80 percent. This allows each bank to utilize a portion of the funds for their use, and still gives the client the 'Cash' needed.

Client agrees to deposit money via wire transfer (SWIFT) in US Dollars only into a "Certificate of Deposit (CD)" in a foreign Forex rated international bank with a "Branch" office in client's home country. Example: A Japanese client would deposit funds in a foreign bank located in Tokyo, Japan.
A 'Pre Arrangement' must be made with the bank before contacting them. Therefore, the client should NOT go directly to the bank themselves. The bank arrangement would
require blocking the funds generally for a period of five (5) years. The bank would agree to allow a 'Credit Line' to be drawn against the CD or CDs. Generally, this is around eighty (80%) percent of the face deposited amount.
Once everything is arranged at the foreign branch bank in the client's home country, the money is transferred. The Bank issues a standard Certificate of Deposit (CD) as receipt and indicates the terms (time and interest).
The Deposit Bank may require holding this CD for 1 to 4 weeks before allowing a "Line of Credit" to be drawn against the funds.
With market conditions fluctuating world wide as they are, the 'Deposit Bank' may also require a portion of the money to be held as additional security, say 20 to 30%.
The CD becomes the client's "Proof of Funds" required by the Asset Manager.
The Asset Manager (often times referred to as the 'programmer') arranges a line of credit on behalf of the client either directly with the receiving bank or through another large Forex bank, which would probably be located in Europe.

Caution

The European Bank may require holding their own asset line. If they do, generally you receive eighty (80%) percent of their amount with receiving bank.

Notice

The client's in country foreign branch bank may not want to issue one single large CD, and may require several CD's to be issued, depending on the sum of money deposited (amount of funds). This is not a problem for the Asset Manager. Also, many countries such as Japan may require an Export License because the funds have been converted to US Dollars and even though the receiving bank is in the client's home country, it is still considered transferring funds to a foreign bank.

Example of how the transaction might work:

Client deposits or has on deposit 100m US dollars which is in CDs in a foreign bank in Tokyo, Japan
The client issues the CDs to the Asset manager who in return arranges a 'Credit Line' for approximately 80% (80.0m US Dollars).
If the European Bank does not require a 2nd credit line the value of the investment asset or cash is 80m. If, however, the European Bank were to request a 2nd credit line, also lets say at 80%, the NET amount would be reduced to 64m US dollars.

Notes

The CD can be 'Cashed' outright, or a 'Credit Line' can be raised against the CD.
The CD 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.
Please see what are "High yield roll over programs".

Hints

CDs are usually issued to individuals, but can be held by a corporation, trust, endowment, nominee, pension fund, non profit entity, etc. as collateral.
CDs may be in any 'Currency', but conversion to US Dollars is generally required and accepted. In some cases the currency may be converted to a third currency.
It is generally easier to raise a 'Credit Line' than convert the instrument to CASH!
Fluctuating World Market Conditions set the pace and determine the trading value, if any.
Usually most every instrument can be converted, however, some are just Not desirable
Trading Instruments on the current World Market.
Required "Documentation' is needed for this type of transaction.

Transacting CDs
Currently almost any CD is welcome, regardless of the currency, as long as the currency issued is traded on the International Monetary Exchange, and there are No restrictions from issuing country.