Previously we have written that BGs, MTNs, and SBLCs that are leased are not permitted for entry into BIIPs on the PPPs. However, further discussions have illustrated the need to unpack that concept and bring it more into focus.
Leased instruments cannot be placed into trading if the signatory on it is the lessee. It would be great to find a way for that to happen, however the ledger cannot be transferred therefore it cannot be blocked and traded. Alternatively, if the asset holder (the entity holding the actual cash) is willing to issue an instrument without any liens or encumbrances and have the client become the beneficiary, we would then have an opportunity.
A leased Instrument can be traded, but 95% of the time it isn’t, because the owner will not issue a block 760, 799 or even a MT542. It is usually leased for credit enhancement only. Unless the asset holder will join in the trade with the client (lessee), then they will not release or block the instrument for the use in a trade.