Wall Street Banks Say Time for Loan Market to Ditch the Fax

A corner of the debt capital markets known for still sending official notifications via email and even the occasional fax is poised for a modern update.

Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co. are developing a new platform for the $4 trillion syndicated loan market that would let lenders access data across their portfolio all in one place. Currently, lenders receive a hodgepodge of updates on each individual loan -- interest payment notices and requests for amendments, for example. It’s a headache for investors who often have to manually update that data into their own internal systems.

“Our clients are spending too much time chasing each individual agent bank for confirming and reconciliation of what they actually own, and this will really give them the power to do some of that themselves,” Alex Naboicheck, head of U.S. leveraged loan trading at Bank of America, said in an interview.

The loan market is one of the few parts of finance that’s been left out of major technological improvements, even as it swelled in size and attracted scrutiny from regulators. It’s been of particular concern for the $1.2 trillion leveraged loan side, which is used by private equity firms and others to layer heavy amounts of debt on corporate balance sheets to fund buyouts.

Unlike bonds, loans are not a registered security, meaning the specifics of how the debt is structured and the company’s disclosure requirements depend on each loan’s legal documentation and that lack of standardization has made it difficult to centralize data. The new system aims to improve the back-end part of the process -- how banks communicate notices to lenders.

Citigroup’s role as an administrative agent came under scrutiny last year after making a $900 million payment to lenders in error, but this new platform would not have prevented that mistake.

Though the new tool isn’t involved in trading, having up-to-date data could eventually lead to improvements in liquidity and notoriously long settlement times -- 18.6 days on average in 2020, according to the Loan Syndications and Trading Association, or LSTA.