In this article, we catch up with iLex’s founder and CEO Bertrand Billon to learn more about the story behind iLex and his vision for transforming the corporate loan market.
What is your vision for iLex?
The multi-trillion corporate loan market is waking up to the undeniable fact that there has been a lack of investments into the development of its market infrastructure, which is severely lagging behind equity and bond capital markets.
iLex’s vision is to leverage technology and industry partnerships to enable the transformation of the corporate loan market, providing that infrastructure with an integrated electronic market that matches all buy and sell intentions and a unique trade execution venue powered by extensive market data and analytics.
iLex is unique as the first multi-dealer electronic market that provides a broader access to primary and secondary loan markets for both buy- and sell-side market participants.
By bringing together the buy and sell sides and leading industry players including IHS Markit, Refinitiv LPC and S&P Global Intelligence, amongst others, we are creating collectively a global loan ecosystem that delivers more market efficiency, price transparency and deal opportunities to all market participants.
Is it possible to change a multi-trillion dollar financial market?
The global loan market provides trillions of dollars of funding to large MNCs and mid-cap companies, contributing to GDP growth and the resilience of local economies particularly in turbulent times. Banks and non-bank lenders lend more than USD 10 trillion in loans a year globally for business growth, leveraged buy-outs, infrastructure and project finance deals.
Despite being the second largest capital market after equities, the corporate loan market remains outdated in the way it operates, relying on emails, scanned documents, faxes and voice interactions.
In this digital era, where other financial asset classes including equities and bonds have been trading over-the-counter electronically for over two decades, we believe the time is right for the global loan market to catch up on electronification and digitisation.
iLex’s ambition is to enable this digital transformation, gradually shifting current market practices from paper, voice and relationship-based transactions to digital solutions and faster electronic trade workflows.
Why is this transformation necessary in the corporate loan market?
Too much time and costs are currently spent by loan syndication and trading teams in banks or fund managers on the buy-side sourcing for and contacting the right counterparties, conducting due diligence and processing of the necessary documents for primary and secondary loan transactions.
As banks face increasing capital constraints, the need to enhance balance sheet velocity and the growing influence of credit portfolio management teams become paramount to restore profitability. This will lead to banks being more active in the secondary market, as they shift from a buy-and-hold to an originate-to-distribute model.
We have observed a decrease in traditional broadly-syndicated loans and an increase of borrowers turning to direct lenders and non-bank lenders for financing, clubbing deals with their established bank pool or postponing certain loan refinancing.
This mirrors similar developments in the US and European markets, and we expect a significant growth of non-bank lending in APAC to fill in some funding gaps and play a more active role in the market.
What will the future of corporate loan markets look like? Will we see a convergence between private and public debt markets?
Price discovery mechanisms, access to deal flow, settlement time and tradability will all have to improve since institutional investors are driven less by commercial relationships than banks. They and their regulators care more about the intrinsic performance of the credit and the protection of investors. Banking regulators will also want to ensure a more diversified, efficient and resilient corporate loan market, especially during times of stressed market conditions.
The corporate loan market will continue to remain private in nature but will need to go beyond historical bank relationships and tap into new liquidity pools to continue to grow. Corporates generally prefer the flexibility of loans, without the administrative burden and public disclosure of bonds, and they would benefit from more efficient, scalable and transparent corporate loan markets, more so when liquidity is strained in equity or debt capital markets.
There is clearly a need for easier and faster access to deal opportunities and for greater standardisation and electronification, for the market to attract new investors and see more liquidity in the secondary market.
Why did you decide to start iLex?
Following my roles at PwC and Societe Generale Corporate Investment Banking, it was my entrepreneurial experience at Chappuis Halder that eventually led me to start iLex.
Chappuis Halder is a boutique consulting firm specialising in the transformation of financial services, and through working with our banking clients then, I identified distinct gaps in structured finance businesses specifically in the corporate loan market, that could be resolved with the use of technology
This was particularly so after the global financial crisis of 2008-2010, where banks and FIs were keenly looking for ways to optimise their balance sheets, reduce costs and improve efficiency and productivity.
By developing the infrastructure the market needs, I firmly believe that iLex will deliver a more efficient, secure and profitable loan market for all participants, and will become the reference corporate loan trading platform globally.