Ipreo and Symbiont announced today that they are creating a new company to overhaul antiquated and costly manual processing in the $3 trillion global syndicated loans market.
By integrating Ipreo's latest loan settlement platform and Symbiont's smart contracts, the new business will deliver fully-automated settlement and maintenance, generating tens of millions of dollars in potential annual savings.
Settlement periods of 20 business days or more threaten the continued growth of the loan market. For the sell-side, the delays tie up precious capital. For the buy-side, settlement uncertainty confounds cash management and necessitates costly credit lines.
Ipreo is the only technology provider to enable new issue workflow across the equity, fixed income, municipal and syndicated loan markets. The top 10 bank arrangers use its existing syndicated loan platform, while the top 20 tier-one investment banks are clients of the firm.
Ipreo will contribute LTS, a recently developed loan settlement platform that incorporates a patented process. Its innovative solution brings securities lending to the loan market, facilitating borrows when sellers don't have the loan asset available for scheduled settlement.
Symbiont is contributing its blockchain expertise and development of 'SmartLoans', the first smart contracts for the loan market. Smart contracts eliminate the need for third-party intervention, in contrast to token-based blockchain efforts that merely provide incremental efficiencies to the ledger system currently used.
"We are delighted to be working with Symbiont to create an industry-wide solution to the loan settlement problem," said Kevin Marcus, President and COO of Ipreo. "With LTS, we addressed the legal and process problems that have plagued loan trade settlement. Our joint venture with Symbiont marries this solution with the transformative power of blockchain technology."
The new business, to be named, will be headed by Joe Salerno, a 25-year industry veteran who currently heads loan trade settlement at Ipreo. Robby Dermody, co-founder of Symbiont, will be COO.
"There's a lot of talk about blockchain but little evidence yet of digital transformation on the front lines, so it's great to lead the way," said Mark Smith, CEO and co-founder of Symbiont. "Ipreo is a perfect partner. Unlike some of the more vocal blockchain start-ups, it has an established track record and already plays a vital role in the smooth operation of the loan markets."
"This business will benefit the entire syndicated loan market, from issuers through investors and regulators. Not only will it help the sell-side save tens of millions in capital costs, but loan portfolio managers will no longer have to endure the drag on yield caused by large cash buckets and costly credit lines," said Salerno.
Syndicated loans have a record unsettled exposure of more than $70 billion, over twice that of high-yield bonds.