I investigate a specific case of the funded equity collar .
Let's assume that counterparty $A$ already has a stake in share $XYZ$ and wants to get funding out of it from a bank $B$, which does not want to get too much credit exposure from the resulting operation.
If I refer to this question , bank $B$ can offer a margin loan to counterparty $A$ which must pledge its shares $XYZ$ and buy a put option strike $k$ and sell a call strike $(k+\epsilon)$ on shares $XYZ$ (see existing question above). In that case, bank $B$ will have to delta hedge the collar by short-selling shares, which had to be borrowed earlier from a third counterparty.
However, what if the borrowing and lending market is not liquid enough, such that bank $B$ might not be able to borrow shares $XYZ$ from the market. It would then mean that delta hedging is just not possible or should be done via the shares in the pledge, which is legally forbidden a priori.
Is there an alternative to the margin loan (pledge + financing) in that particular situation of illiquid lending market? For instance, would it feasible to transform the pledge into a stock lending (GMSLA) or a repo (GMRA) without modifying the rest of the structure ?