Bankers are betting that the ever-evolving syndicated loan market, particularly the secondary trading market, is about to land on a new plateau.
Bank of America Corp., Credit Suisse First Boston, Deutsche Bank, Goldman Sachs Group, and J.P. Morgan Chase & Co. have invested an undisclosed sum into LoanX, an electronic trading system that the banking companies hope will provide secondary loan traders with more information and liquidity.
LoanX Inc., based in New York, has licensed Creditex Inc.'s credit trading technology and is developing a loan-specific system for trading par and near-par loans, Mr. Rushmore said. The system will be available later this year, he said.
While there are other electronic trading systems that exist or are being created to accomplish similar goals, none has permeated the broader loan market. The bankers who are backing LoanX say they believe that support from the five financial institutions - representing some of the biggest participants in the syndicated loan business - will push this system into the forefront.
"You've got a critical mass of dealers" who are motivated to use the product, said Clay Desjardine, head of secondary loan trading and sales at Deutsche Bank. "The other ones don't have the same amount of dealer involvement."
Eric Rosen, who runs loan trading at Morgan Chase, said his company believes "that LoanX will enhance liquidity in the secondary loan trading market and provide timely information to the investor universe." The New York banking company, which is the top arranger of syndicated loans, invested in the system because the bankers "believed in the product and group of people running it," he said.
Michael Rushmore, the co-founder and chief executive officer of LoanX Inc., said Wednesday that the use of an electronic trading platform would bring added liquidity, transparency and growth to an already fairly liquid marketplace.
Mr. Rushmore was managing director of syndicated finance research for Banc of America Securities before co-founding LoanX Inc. in November with Creditex Inc., a company that runs an electronic trading platform for credit derivatives.
Institutional investors will be able to use LoanX to more actively manage their credit risk portfolios, he said.