The MAC Protocol is the fourth Protocol to the Cape Town Convention.Ħ. The Convention was subsequently extended by the Rail Protocol in 2007, and the Space Protocol in 2012. The Aircraft Protocol, adopted alongside the Convention in 2001, is the most widely ratified Protocol and has enjoyed great success in lowering the cost of aircraft financing worldwide. The Convention is applied to specific categories of mobile equipment through Protocols. The Convention allows for “international interests” to be created in relation to security agreements, title reservation agreements and leasing agreements where the debtor is located in a State that has adopted the Convention.ĥ. The Convention establishes uniform international standards for the creation, enforcement, registration and priority of security interests in certain categories of high-value, uniquely identifiable, and mobile equipment. The overarching goal of the Convention is to facilitate the efficient financing and leasing of mobile equipment by reducing risks for financiers. The Convention on International Interests in Mobile Equipment, adopted in 2001 in Cape Town, South Africa (the “Cape Town Convention”) is considered to be one of the most economically significant international commercial law treaties ever adopted. Increasing the availability and lowering the cost of credit will give entities in the MAC sectors better access high value, technologically advanced equipment.Ĥ. In other countries, the MAC Protocol will allow financiers to provide credit at a lower cost. This Protocol will allow financiers to provide credit in countries where they are currently unable to do so. To address these problems, a fourth Protocol to the Convention on International Interests in Mobile Equipment has been developed to provide a clear international framework for asset-based financing of MAC equipment (the “MAC Protocol”). Consequently, many entities involved in the MAC sectors cannot access credit on reasonable terms and thus lack the ability to acquire the equipment needed to improve productivity and performance.ģ. Companies also face challenges in securing credit using MAC equipment they already own as collateral. In certain markets, borrowers have no choice but to self-finance entire sales. Credit may cover as little as 20% of product value in developing country markets. Credit availability in the MAC sectors remains constrained in many regions. This uncertainty limits the availability of secured finance for MAC equipment across the globe.Ģ. Financial institutions are unwilling to provide credit to companies in the MAC sectors to purchase or lease equipment, due to uncertainty created by domestic laws, the possible movement of assets across borders, or challenges in enforcing their rights upon default or insolvency. Yet, the financing of MAC equipment remains challenging in many parts of the world. The global market for mining, agricultural and construction (“MAC”) equipment is hugely important, accounting for approximately $200 billion annually. GLOBAL CHALLENGES IN THE FINANCING OF MAC EQUIPMENTġ.
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