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why Cash Collateral Account

talking about the credit enhancement of bond issuance, there is a type of it named “Cash Collateral Account”. It means the cash is reserved in a specified account as collateral. 

why question is that, if the issuer has the cash to be reserved for enhancement, why they need borrow the money?  anyone has a real example for this kind of collateral account. 

thank.s 

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My company (SME size) need 35 % cash deposit coverage to arrange revolving credit line. Maybe that’s answer on your question, it’s depending on Company’s ability to borrowing, credit risk appraisal, size of company, geo location etc.

Collateral cash deposit is an interest bearing as well.

play it again, Sam

redondo wrote:

talking about the credit enhancement of bond issuance, there is a type of it named “Cash Collateral Account”. It means the cash is reserved in a specified account as collateral. 

why question is that, if the issuer has the cash to be reserved for enhancement, why they need borrow the money?  anyone has a real example for this kind of collateral account. 

thank.s 

Your collateral is not 100% of the debt, it is about a fraction of it. If you have 5 million on cash you can rise 50 million. Having 45 million proceeds are good enough for me.

Las almas de todos los hombres son inmortales, pero las almas de los justos son inmortales y divinas.
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I see, thank you very much, mate! 

The company i work at does this. They, as a collateral for short term loan, provide their cash accounts. Mostly, the lender is the bank. 

There are no FACTS, only INTERPRETATIONS..

Why is this an external credit enhancement and not under the category of “Asset or Collateral Backing”?