Blockchain technology is already promising to disrupt and radically improve many aspects of the world’s economy and now we learn that the technology is also going to be applied to syndicated loans. Ipreo and Symbiont are creating a new venture to overhaul the costly manual processing in the $3 trillion global market.
Explaining the rational for the move, the companies say that 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. Syndicated loans have a record unsettled exposure of more than $70 billion, over twice that of high-yield bonds.
Ipreo is private-equity held by Blackstone and Goldman Sachs Merchant Banking Division, and 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. Symbiont allows financial market participants to create programmable versions of traditional securities that take the form of “Smart Securities.”
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Ipreo will contribute LTS, a recently developed loan settlement platform that 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’. Integrating Ipreo’s latest loan settlement platform and Symbiont’s smart contracts, the new business promises to deliver fully-automated settlement and maintenance, generating tens of millions of dollars in potential annual savings.
“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, yet 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.”