Efforts under way since 2007 to automate the $750 billion market for junk-rated corporate loans may soon pay dividends just as Moody's Investors Service warns managers may not be able to refund investors trying to flee.
The International Swaps and Derivatives Association may start reviewing as soon as this month whether electronic notifications aimed at automating quarter-end payments and interest rates are ready to be used instead of fax machines, Bhavik Katira, chair of an ISDA group responsible for the initiative, said in an interview. Messages focused on cutting the time its takes to settle a trade from the current three weeks could also be sent for approval this year.
Modernization can't come soon enough for loans, which have been identified by regulators as a source of concern due to deteriorating underwriting practices. After receiving a record $61.3 billion last year, loan mutual funds have seen eight consecutive week of outflows, with Moody's now saying that managers may struggle to raise cash to meet investor redemptions if too many try to exit at once.
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