Magazine article American Banker

BankBoston Managing CLO with Web-Based Software

Magazine article American Banker

BankBoston Managing CLO with Web-Based Software

Article excerpt

BankBoston Corp. is using the World Wide Web to manage loans backing a complex multibillion-dollar securities deal.

The bank developed a Web-based application for placing new loans in a trust that issued $2.2 billion of collateralized loan obligations, or CLOs, in November.

Market partipants said they knew of no other CLO management system using the Internet.

The move fits into BankBoston's efforts to use the Web whenever possible for internal and external operations, said Chris John, senior section manager of fixed-income systems at BankBoston, which last week announced its agreement to merge with Fleet Financial Group of Boston.

"Getting products developed for the market is dramatically faster using Web-based technology," Mr. John said.

In CLO transactions, banks pool corporate loans and sell them to a trust, which issues bonds backed by the cash flows on the loans.

The structure lets banks remove the loans from their balance sheets, in some cases freeing up capital.

Banks and other financial institutions worldwide sold 46 balance-sheet CLOs totaling $55 billion in 1998, according to Moody's Investors Service.

That total includes 25 so-called synthetic transactions backed by derivative instruments that mimic bank loan performance.

BankBoston developed the Web-based approach for managing the loans in the trust. Because corporate borrowers can pay down loans before the bonds they back have matured, BankBoston could need to replenish the trust. …

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