88-5

February 22, 1988

Dear Mr. ________:

This is in response to your letter of February 10, 1988 asking whether guarantees by the California Export Finance Program would qualify as a secured transaction.

Our analysis of the transaction indicates that the proposed loan would not be a secured obligation as the security you describe in your letter does not qualify as eligible collateral for secured lending purposes. Additionally, since the guarantee program is not backed by the full faith and credit of the State of California the proposed loan would not be exempt from the provisions of the lending limits.

Your letter references a possible ruling several years ago that the guarantee portion of the program would be considered a secured transaction. We cannot find any record of this ruling and in any event, if such a ruling was given it is our current opinion that the ruling would have been in error. This is due to the absence of tangible property securing the transaction as required by Financial Code Section 1223.

If you have any further questions, please contact me.

Sincerely,

HOWARD GOULD
Superintendent of Banks

By:

JOHN R. PAULUS
Deputy Superintendent

(415) 557-8686

JRP:m

February 10, 1988

John Paulus

Dear Mr. Paulus:

Mr. Bill Betts, Examiner with your San Diego Office, has suggested that I send you the enclosed copy of the guide to the California Export Finance Program. ________ has agreed to participate with the ________ – Export Finance Office in financing qualified agricultural exporters. We have received a commitment from the Export Finance Office for a $350,000. (85% of $411,000.) Pre-Shipment Exporter Risk Guarantee.

Our proposed loan to our customer would be secured by accounts receivable, crops, contract rights and intangibles and additionally secured by a $350,000. Pre-Shipment Exporter Risk Guarantee issued by ________ Export Finance Office. We are seeking an opinion from the State Banking Department to determine whether the State guaranteed portion would be considered a secured loan.

I talked to Mr. ________, Director of the ________ Export Finance Office today and he believes the State Banking Department issued a ruling several years ago that the guaranteed portion is considered to be a secured transaction. Mr. ________ felt that it would be important to obtain a ruling since the Export Finance Office currently deals with over fifty (50) banks in California.

Enclosed, please find a guide of the Export Finance Office. If you have any questions, please feel free to give me a call.

Yours truly,