FleetBoston Financial Corp. has formed a venture with a New York-based Internet company, Equavant Group, to develop an online trading system for syndicated bank loans.
Live trading on the system, at www.Equavant.com, is scheduled to begin next month.
The system will bring more liquidity and more participants to the growing market for bank debt, said Andrew Komaroff, executive vice president of Equavant, in an interview Tuesday. It will enhance, not replace the way investors currently trade syndicated loans, Mr. Komaroff said, and will create efficiencies.
An online trading system might be easier than the current method using the telephone and fax machine to send loan documents and other information to bidders he said. Online trading will also make the market more accessible to smaller regional institutions outside New York, he said.
Fleet is providing financial backing for the project, which is expected to be announced today.
Equavant Group would not disclose the amount of Fleets investment, except to say that it is meaningful. The company, which intends the site to be independent, is negotiating for injections of capital from four to six other financial institutions that have a significant presence in the syndicated loan market.
Equavant is an offshoot of New York-based ereorg.com, whose previous investors include Warburg Pincus, a New York private equity firm; MC Capital, the U.S. merchant banking unit of Mitsubishi Corp.; and AMT Capital.
Equavant has hired several executives from traditional banking companies with years of experience in the syndicated loan market. Those executives include Susan Pritchard, formerly with J.P. Morgan & Co.; Sherry Kernan, formerly with Bank of America Corp.; and John Bright, formerly with Donaldson, Lufkin & Jenrette.
Timothy Conway, managing director and head of debt capital markets at Fleet, and Paul Trefry, managing director in charge of loan syndications at Fleet, have joined Equavants advisory board.
The first release of the system will use an auction format. By the end of the first quarter, the system will also offer bid-and-ask formats and directed-trading formats, and it will have a new-issue capability. Registration will be free, but Equavant said it will charge the buyer and seller 5 basis points on the face value of a loan traded in the auction format.
Equavant is focusing on the U.S. loan market but is developing similar systems to trade European and Japanese bank loans.