Syndicated Loans Tokenization
Case study
Syndicated Loans Tokenization using Blockchain (Proof of Concept)
Business line
Financing
A multinational financial services industry leader. It is one of the largest financial institutions in the world, and is present mainly in Spain, South America, Turkey, Italy and Romania.
The challenge
Navigating the Client's Challenge
Delve into the complex landscape of syndicated loan execution, where the reliance on multiple intermediaries, legacy systems, and cumbersome manual processes hinder efficiency and increase costs.
In the realm of syndicated loan execution, traditional practices and legacy systems have created a complex environment characterized by inefficiencies and dependencies.
The involvement of multiple intermediaries and the absence of standardized solutions contribute to increased operational costs and prolonged turnaround times.
The extensive manual work required for documentation exposes the process to human error and introduces delays.
To overcome these challenges, a paradigm shift is necessary to modernize syndicated loan execution, optimize workflows, and leverage innovative technologies to streamline processes and enhance efficiency.
Solution
Innovative Solutions Provided
Revolutionizing Syndicated Loans with Blockchain Tokenization: A Proof of Concept Approach
This platform not only demonstrated the viability of using blockchain for loan tokenization but also showcased the immense benefits it brings to the management of syndicated loans.
The primary objectives of this project were twofold: Firstly, to validate the technical, legal, and commercial viability of tokenizing syndicated loans, and secondly, to secure industry endorsement from a prominent financial entity. These aims set the foundation for scaling the solution and creating modular components for use in future real-world issuances.
ioBuilders engineered a solution that achieved these pivotal goals by meticulously designing and rigorously testing the smart contracts essential for syndicated loan tokenization.
The initiative accurately mirrored the operational dynamics of a traditional syndicated loan by involving key stakeholders such as the bank agent, lenders, and borrowers.
From a functional standpoint, the project demonstrated the capability of smart contracts to orchestrate the entire lifecycle of a syndicated loan. This encompassed the initial issuance, complete with all requisite terms for loan creation, including deal specifics, payment details, and interest rate configurations.
Beyond loan creation, the solution facilitated the configuration of covenants and waivers. Two distinct types of covenants were implemented: a financial covenant, which monitors a financial ratio periodically submitted by the borrower, and a Cash Sweep Covenant, which tracks the actual utilization of the borrowed funds by the borrower.
EIP-1400 served as the foundational framework for the development of the smart contracts representing the syndicated loans. This was complemented by other ERC standards to infuse necessary features, such as partial fungibility by partitions, authorized operator settings, transfer restrictions, and the ability to reference unique external documents, effectively replicating the issuance and lifecycle management of a syndicated loan.
A pivotal element of the project lies in our strategic partnership with Garrigues, a leading authority in regulatory and legal expertise in Smart Contracts and DLT. Collaborating closely with Garrigues enabled us to incorporate robust regulatory frameworks and legal guidance into our solution, ensuring compliance and legal validity at every step.
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Beyond the technology
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