New service allows U.S. syndicated loans to be used as eligible collateral in financing transactions
BNY Mellon, a global leader in investment management and investment services, has launched Alternative Loan Financing (ALF), an innovative concept that provides an alternative structure for U.S. syndicated loans to be used as eligible collateral in a wide range of financing transactions.
Traditionally, syndicated loans have not been easily transferable between counterparties and therefore have not normally been used in many types of financing transactions. ALF delivers unique benefits to clients who wish to use syndicated loans as collateral because it provides them with improved costs of collateral usage, improved liquidity, and potentially lower funding and set-up costs.
In addition, since BNY Mellon retains control of the syndicated loans at all times, clients benefit from the independent third-party administration of the loans. BNY Mellon handles all settlement and loan administration requirements, receives and reconciles all principal and interest payments and independently manages collateral valuation, mark-to-market and margin calls.
"Given the shortage of quality collateral in the capital markets, there is a great demand for loans as an asset class since they are generally perceived as good quality collateral. Alternative Loan Financing gives investors the opportunity to easily invest in this asset class," said Jocelyn Lynch, managing director at BNY Mellon Corporate Trust.
Developed by BNY Mellon's corporate trust, global collateral services and client technology solutions teams, ALF was the winner of A.C.E., the company's global innovation competition. The objective of A.C.E., which stands for Accelerate, Collaborate & Execute, is for employees to identify ideas related to financial services that represent potential new business and services for BNY Mellon and its clients.