By Peter Lee
See below for excerpts from a recent Euromoney feature. For the full article, see here.
Digital technology is finally coming into play for the US loan market and soon in Europe.
Versana, a technology company founded by leading agent banks in the syndicated loan market to capture digitally the ever-changing data on corporate loans and make it available to lending banks in close to real time through APIs, achieved a key breakthrough with JPMorgan.
JPMorgan, a founding bank, has achieved straight-through processing on a number of term loans and revolving credits, sending as an agent and receiving as a lender, in close to real time, new updates on loans without any manual re-inputting of data.
This is straight-through processing of the data essential for lending banks to understand changes in the underlying cash flows and in their own risk positions on loans that they already hold.
A bondholder knows the price it paid for a bond, the amount it will get back at maturity, while the coupon is fixed.
“Trade data is on Trace [Finra’s Trade Reporting and Compliance Engine] and relatively straightforward compared to corporate loans,” says Cynthia Sachs, founding chief executive officer of Versana. “You just need an identifier, amount, price and date to process a transaction. For loans, which are floating rate, not fixed coupon, you now have to manage changing, rolling, underlying Sofr contracts and interest accruals.”
And that is just one dynamic component. A change in principal outstanding through an early prepay or amortization will feed through to changes in different calculations and even voting rights if a borrower requests an amendment.
“That’s one reason why restructuring proposals can take so long,” Sachs says. “We have over 250 separate data fields for loans, and it’s required an enormous amount of work to normalize all that data.”
