| Warehouse receipts are a crucial element
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| | The main advantages of warehouse receipt
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| for risk mitigation, enabling a financier
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| | financing from a risk management
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| to lend to a borrower, who wants to
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| | perspective are:
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| finance the shipment of commodities for
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| | The identity of the collateral is less
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| sale or purchase. Using warehouse receipt
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| | contestable and the intention of the
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| finance, a bank, or trader, relies on
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| | borrower to pledge it is clear, avoiding
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| goods in an independently controlled
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| | ownership disputes and competing claims.
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| warehouse to secure financing. Usually
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| | The collateral can be auctioned or sold
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| providing (among many things) there is an
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| | promptly and at low cost if there is a
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| off-taker and that there are other forms
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| | loan default
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| of recourse (the borrower?s balance sheet
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| | A lender holding a warehouse receipt can
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| for example) banks will lend against
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| | claim against the issuer (the warehouse
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| commodities stored in a reliable
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| | company) as well as the borrower in the
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| warehouse and which have been properly
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| | event that the collateral goes missing
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| pledged to them in a sound legislative
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| | In a bankruptcy scenario a document of
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| environment. So warehouse receipts
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| | title can cut off the claims of competing
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| provide for a degree of physical risk
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| | creditors.
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| mitigation and, in support of an
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| | Warehouse receipts can be negotiable or
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| exchange-based trading system, they are
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| | non-negotiable. A non-negotiable
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| important for underpinning futures.
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| | warehouse receipt is made out to a
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| Accordingly, warehouse operators can act
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| | specific party (a person or an
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| as key influencers of risk management. If
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| | institution). Only this party may
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| they are able to issue warehouse
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| | authorize release of goods from the
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| receipts, which can be used as collateral
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| | warehouse. He may also transfer or assign
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| by banks, they may use this as a way of
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| | the goods to another party, for example a
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| encouraging deliverers of commodities to
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| | bank. The warehouse company must be so
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| move stocks into their facilities.
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| | notified by the transferor before the
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| Warehouse operators receive goods into
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| | transfer or assignment becomes effective.
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| the warehouse and issue ?receipts?
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| | The non-negotiable warehouse receipt in
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| showing the goods have been received into
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| | itself does not convey title and, if it
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| the store. Among other things, the
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| | is in the name of, for example, a trading
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| receipts themselves contain information
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| | firm, it needs to be issued in the name
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| about the quality and type of the
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| | of or transferred to the bank in order
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| commodity taken into store. The receipts
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| | for the bank to obtain more than just a
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| are for the information of the depositor
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| | security interest. A security interest is
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| of the goods or, if he is a borrower, for
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| | much less attractive to a bank than if it
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| his bank. However, these receipts are not
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| | has what is called possessory collateral,
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| negotiable documents of title, i.e. the
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| | i.e. it has direct recourse to the
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| title to the goods themselves may not
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| | warehouse where the goods are stored and
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| transfer from one to another person via
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| | in the event of a default or similar, it
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| the passing of the related warehouse
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| | is easy for the bank to sell the
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| receipt.
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| | commodities in a shorter time frame.
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| Herein lies the potential for some degree
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| | Issuers of non-negotiable warehouse
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| of confusion. The term ?warehouse
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| | receipts include collateral managers.
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| receipt? means different things to
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| | They are becoming increasingly important,
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| different groups of people around the
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| | with companies like ACE, Cotecna, Control
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| planet. For example, in the United
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| | Union, Drum and SGS rolling out
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| States, the term ?warehouse receipt? is
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| | collateral management products to serve a
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| used for a document evidencing storage of
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| | growing international market.
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| a commodity in a warehouse. Unlike
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| | Notwithstanding the fact that most
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| elsewhere, it is a document of title,
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| | bankers, borrowers and warehousemen say
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| supported by legislation; in this case
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| | they find collateral management ?just too
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| the US Warehouse Receipts Act of 2000,
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| | expensive? their desire to use the
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| which replaced a piece of legislation
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| | services of collateral management
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| enacted in the US in 1916. By contrast,
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| | companies is increasing. In the absence
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| in the United Kingdom a warehouse receipt
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| | of totally secure physical commodity
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| is a non-negotiable instrument simply
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| | storage facilities and resulting from the
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| notifying that at a certain moment in
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| | risks in moving commodities about, banks
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| time a certain amount and quality of a
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| | are obliged to find other structures for
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| commodity was delivered into a warehouse.
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| | protection against physical risks. The
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| In the UK, a negotiable form is
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| | collateral management agreement, or CMA,
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| represented by a warehouse ?warrant? of
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| | offered by a number of global firms,
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| the type issued by London Metal
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| | offers one such solution.
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| Exchange-nominated warehouses.
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