How does assurance for a loan work?

General information about collateral

When the capital return is in the form of loans, the borrower may provide different collateral for the loan, which is not possible when issuing preference shares. The loans that are marketed are often subordinated loans, i.e. the lenders have collateral that comes after the bank loan in the prioritisation scheme.

The collateral for the loans often consists in the pledging of property or the lending of the loan. Mortgaging property means that the borrower hands over or mortgages property to the lender, if the borrower can not repay the loan, the lender may then sell the property. The following are the most common forms of collateral that occur on loans marketed through Tessin.

Real estate mortgage

Real estate mortgage means that the property owner applies for a mortgage in the property and receives a mortgage bond as proof of the mortgage, the mortgage is then handed over to the lender as collateral. Each mortgage letter has a so-called "inner position", i.e. which part of the property's value as the mortgage bond refers. If the loan is not repaid, the mortgage can be realised, which means that the property is measured by the Swedish Enforcement Authority (Kronofogdemyndigheten), which sells it at an effective auction.

Second-hand mortgage

To receive a second-hand mortgage in existing mortgage bonds means that the mortgage has already been pledged to another lender. Second-hand collateral can provide better security than taking out new mortgages with poorer positions in case the pledged mortgage is not fully pledged, for example, if the first lender has a pledge of 10million SEK with an intraday position of 0-10m, but the debt has been reduced to 5 million SEK, there is a space of 5 million SEK that can be pledged to a new lender.

Mortgages of reverse to housing association

Project owners often build a property and then sell the completed building to a housing association. The purchase is often funded with bank loans and member contributions in the association, which is paid when the building is completed. The housing association cannot pay in advance but instead issues a reverse (debenture) - a promise that the project owner will be paid when the bank loan and membership fees are obtained. If the project owner does not repay the loan, the lender may sell the revenue or collect the amount that the housing association will pay to the project owner when the building is completed.

Share pledge

Share pledge means that the shares in a company are pledged as collateral for a loan. For example, if a parent company has a loan and there are assets of value in the subsidiary, the shares in the subsidiary can be pledged. If the borrower does not pay the loan, the lender may take over the shares in the subsidiary and thus receive security for the loan. However, in case of insolvency, stockpiles may have a limited financial value because lenders with a mortgage in the property, i.e. the bank, are prioritised.

The bail

The main forms of the bail are the simple bail and the deposit guarantee. In the case of simple bail, the lender may only turn to the borrower for the borrower after the lender has attempted to be paid by way of clearance. Proprietary, a guarantee "as for own debt" means that the guarantor has the same position as the borrower regarding the responsibility to repay the loan, ie the lender can turn to the borrower and the guarantor who has money.

Corporate Mortgage

Corporate Mortgage is a type of security in a company's property, i.e. assets other than real estate, money and shares. A certain amount of the assets of the business is then written down at the Swedish Companies Registration Office and the borrower receives proof of this in the form of a corporate letter of subscription that is pledged to the lender. The mortgaged property is not determined, but instead the value of the borrower's general property mass is counted as it appears from time to time.

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