What drives Successor Loan Agent innovation?

APAC lenders typically appoint successor agents to help administer distressed loans and support various liquidity events such as refis/restructurings etc.

As banking and credit fund business models converge, successor agents are being called upon to innovate their capabilities to help lender/borrower solve emergent ‘tech-gaps’.

Solving the ‘tech gap’

While payment tech and equity trading tech seem to have evolved at lightspeed, debt capital markets’ transactional innovations have advanced at a much slower pace.

Consider frictions involved in pricing illiquid debt instruments, undertaking due diligence on an NPL portfolio or the difficulties in creating efficient secondary debt markets.

Syndicated, bilateral or fund finance frictions

While private credit innovation has been effective at delivering liquidity to new markets, there are still many interesting frictions yet to be solved.

Consider our stable of typical APAC syndicated, bilateral and fund finance deals. A novation of a large loan portfolio might mean that it is no longer convenient for the lead lender to retain the agency role.

A bilateral deal between two private credit fund managers might be just as large, however the parties may not have the tech stack to permit efficient administration.

Fund finance deals can be complex, particularly for hybrid arrangements that deploy security/collateral devices over investor commitments and underlying credit portfolios.

Business model convergence

Further convergence between banking and private credit models will mean that successor agents need to help solve these emergent ‘tech gap’ frictions.

For instance in syndicated loan deals a successor agent might not only deliver valuable transactional independence to help address conflicts of interests, but may also need to facilitate secondary markets.

For bilateral and fund finance deals, successor agents may simultaneously deliver ‘bank-like’ payment platforms as well as digitized custodian and collateral monitoring capabilities.

Successor agent innovation

It is perhaps this inter-market convergence trend that presents the biggest single business risk to current incumbents, but also the greatest innovation opportunity. Is your successor agent ready?