Most of the businessmen from Mendoza who ever needed a bank loan to expand their business know that it is not an easy decision to mortgage any of their production properties to obtain said funds. But since until recently there were not many alternatives, there was no other. However, in recent years, the Guarantee Trust has been used for the same purpose, a very useful tool to guarantee certain credit operations (especially investment projects) with a strong security framework. Of course, this tool has been developing strongly in Buenos Aires and more slowly in the provinces, but it is a trend that is coming strongly, without a doubt, in the interior.
By structuring a trust agreement, the debtor (for example, a medium-sized warehouse that needs new fractionation machinery) transfers, to a trustee, the fiduciary ownership of a specific asset (the asset that, in a traditional credit, would have been the mortgage / pledge guarantee). The Trustee is obliged, in the event that default situations arise, to liquidate that asset and with the proceeds of the liquidation to settle the debtor's debt with the creditor (in the event of a remainder it turns it over to the debtor).
To the extent that no defaults are verified, once the entire debt has been paid, the trustee returns full ownership of the property to the debtor (the settlor).
Advantages over the traditional mortgage guarantee
This guarantee is very useful for long / medium duration projects since it has several advantages over the mortgage.
The first advantage is that, in the event of default, the initiation of a foreclosure judgment is not required because, according to the letter of the contract, the trustee must immediately proceed to the liquidation of the property. On the other hand, if the operation had been structured through a mortgage, the mortgagee is not free from another creditor, for any other reason, seizing that mortgaged asset. Notwithstanding the fact that the mortgagee has privilege over the property, before an execution ordered by another creditor, the mortgage credits do not have privilege over the costs of the judgment.
Another advantage with respect to the mortgage is (for example in the case of a real estate development project) that the trust agreement can provide for the continuity of the work despite the default of the debtor. This clause is very useful for projects that are half finished have little market value.
In turn, the trust provides a great security framework against the bankruptcy of the debtor (trustor), as long as that trust has been structured outside the period of suspicion.
By way of synthesis, we can conclude that at the moment companies are being recommended the traditional pledge or mortgage when they want to guarantee a common credit, that is, for relatively short terms, but it is also advising the structuring of trusts to guarantee the credits that have to do with investment projects, that is, they need relatively long repayment terms.
