Automated bond platform cut Volvo’s issuance lead time to a fraction

VIDEO | Preparing for a syndicated bond issuance requires mammoth effort, and even more so when you are the first issuer of such a bond on a new debt digitisation service. Yet, Volvo Treasury succeeded in doing just that on the Origin platform last year – and raised €1 billion in a dual-tranche deal. Danijel Afolter, Portfolio Manager at Volvo Treasury walked us through the process during his session at Treasury 360° Nordic 2024.

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The billion-euro deal was the result of a big leap of faith. “We decided to test this (the partnership with Origin) to the max,” Afolter recalled. So they started with the “most complicated transaction” they could – involving six banks, two legal firms and some 27 users.

It took a lot of groundwork, but “as soon as the bonds were priced, just a few minutes after, at the click of a button, all the documents were generated –14 different documents”. The speed has Afolter feeling hopeful for a transformation in bond settlement. “The reason settlement for bonds is usually T+5 is because of the documentation. It takes a while to produce these documents, to review them and so on,” he says.

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The process has since improved with every transaction, and is now extremely streamlined. For this, Afolter credits standardisation. “Everything is standardised. There is no room for personal opinion,” This ensures that the groundwork is done properly so that mistakes are avoided. He believes that this would lead to lower legal costs for transactions in the long run – “we should stop paying people to argue over whether there should be a comma or a dot”.

Looking forward, Afolter is hoping to get more banks on the platform – and get bond settlement down to T+1. “We need to have an open mind when it comes to tech and choosing future tech. Tech changes, time changes, but what we want to do is to stay relevant, both as Volvo Group and as Volvo Treasury.”

Danijel Afolter is Portfolio Manager at Volvo Treasury.

Finding the phenomenon interesting? For a deep look into the emerging technical possibilities for bond issuance, find this article on our sister news site PostTrade 360°.

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