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Common reasons for raising finance via a bond, is for a company to acquire funds for a particular project such as a large capital investment, an acquisition or general debt re-structuring.
In RBC Trust (Trinidad & Tobago) Limited’s role as a corporate trustee, we act as a funnel for communication between the company issuing the bond (the Borrower) and the investors who purchase the bonds (the Lenders). The Trustee therefore ensures that the terms and conditions that govern the bond are upheld or at least varied by the requisite majority where necessary, and particularly on contentious issues such as late interest payments, refinancing of the structure, release of security, early maturity dates etc.
The role of the corporate trustee therefore allows the Borrower to focus on their core day to day business, in the knowledge that the trust is being managed and administered by an experienced and neutral third party. The advantage to the Lenders and to the Borrower is that they do not have to deal with each other directly, but can contact the Trustee for information governing the bond or for impartial guidance.
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All companies registered under the Insurance Act of Trinidad and Tobago are required to place assets equal to their liabilities and contingency reserves into a statutory fund, on behalf of local policy-holders. The statutory fund is a legal deposit required to meet policyholders' obligations in case the insurance company runs into financial difficulties, so that in a possible wind up scenario, the policyholders will have first priority on these assets of the company.
The Insurance Act requires that a Trustee is properly appointed to act in a custodial capacity over these assets, and RBC Trust (Trinidad & Tobago) Limited’s Corporate Trustee duties include ensuring that:
By law, insurance companies are only permitted to pledge assets and instruments to the statutory fund, that qualify under the Second Schedule of the Insurance Act.
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As a licensed financial institution, RBC Trust (Trinidad & Tobago) Limited can hold the collateral on behalf of investors of a bond, as security for performance of the borrower's obligations under the trust deed governing that bond.
The borrower grants a security interest in the collateral to the collateral agent, who takes all necessary administrative and enforcement actions with respect to the collateral on behalf of the investors. The structure avoids granting security separately to all lenders, which would be costly and impractical.
This service may be required for instance in private placements which are not required to have a Trustee, or sometimes in cross-jurisdictional transactions where independence between the Trustee and Collateral Agent is required.
At RBC Trust (Trinidad & Tobago) Limited the services we provide as collateral agent include: