Method and apparatus for conducting loan repurchase transactions

• US 20040030638A1
• Filed: 12/04/2002
• Published: 02/12/2004
• Est. Priority Date: 08/08/2002
• Status: Active Grant

• Current Assignee: Goldman Sachs & Co. LLC (Goldman Sachs Group Incorporated)
• Original Assignee: Goldman Sachs & Company (Goldman Sachs Group Incorporated)
• Inventors: Dwin, Damien
• Granted Patent: US 8,781,941 B2
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 20/02 involving a neutral party, e.g. certification authority, notary or trusted third party [TTP]
• CPC Class Codes: G06Q 20/023 the neutral party being a clearing house
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

Systems, methods, apparatus, computer program code and means for conducting repurchase transactions include identifying at least a first bank loan held by a first party. The at least first bank loan is transferred to a second party in exchange for a first sum, and the parties agree, at substantially the same time as the parties agree to the transfer, that the first party repurchases the first bank loan at a later date for a second sum. In some embodiments, reverse repurchases may also be performed.

Claims

1. A method for conducting a repurchase transaction, comprising:

identifying at least a first bank loan held by a first party;

transferring said first bank loan to a second party in exchange for a first sum; and

agreeing, at substantially the same time as said transferring, that said first party repurchases said first bank loan at a later date for a second sum.

2. The method of claim 1, wherein said first bank loan is a syndicated loan.

3. The method of claim 1, wherein said first bank loan has a coupon of greater than or equal to approximately Libor+1.00%.

4. The method of claim 1, wherein said transferring comprises executing an assignment of said at least first bank loan to said second party subject to retention by said borrower of economic benefits of said at least first bank loan.

5. The method of claim 4, wherein said assignment includes assignment of voting rights associated with said at least first bank loan.

6. The method of claim 1, wherein said first sum includes a repurchase loan amount plus a fee.

7. The method of claim 1, wherein said second sum is a periodic sum paid in exchange for said first sum.

8. The method of claim 5, wherein said second sum is an interest charge payable on a periodic basis in exchange for said first sum.

9. A method for hedging risk associated with an investment, the method comprising:

identifying a first bank loan having a desired risk profile;

borrowing, from a lender, said first bank loan for a period in exchange for collateral and a fee; and

selling said first bank loan to a buyer for a payment amount.

10. The method of claim 9, wherein said investment is an investment in bank loans.

11. The method of claim 9, further comprising:

purchasing an equivalent of said first bank loan for a second payment amount; and

returning said equivalent of said first bank loan to said lender prior to an expiration of said period.

12. The method of claim 11, wherein said returning said equivalent further includes paying a loan fee to said lender.

13. The method of claim 11, further comprising:

receiving said collateral in return for returning said equivalent.

14. The method of claim 9, wherein said lender is a repo desk.

15. The method of claim 14, wherein said first bank loan is selected from a plurality of bank loans made available for shorting by said repo desk.

16. A transaction method, comprising:

entering into a plurality of reverse bank loan repurchase agreements to build an inventory of available bank loans;

lending, for a term, at least one of said available bank loans to a short seller in exchange for collateral and a fee;

receiving, prior to expiration of said term, a return of said at least one of said available bank loans; and

returning said collateral to said short seller upon said return.

17. A transaction apparatus, comprising:

a processor;

a memory in communication with said processor and storing instructions for operating said processor to

receiving information identifying at least a first bank loan held by a first party;

generate an agreement to transfer said first bank loan to a second party in exchange for a first sum, and at substantially the same time as said transfer, that said first party repurchases said first bank loan at a later date for a second sum.

18. A transaction apparatus, comprising:

a processor; and

a memory in communication with said processor and storing instructions for operating said processor to

receive information identifying a first bank loan having a desired risk profile;

generate an agreement causing said first bank loan to be borrowed from a lender for a period in exchange for collateral and a fee, said agreement further causing said first bank loan to be sold to a buyer for a payment amount.

19. A transaction system, comprising:

means for entering into a plurality of reverse bank loan repurchase agreements to build an inventory of available bank loans;

means for lending, for a term, at least one of said available bank loans to a short seller in exchange for collateral and a fee;

means for receiving, prior to expiration of said term, a return of said at least one of said available bank loans; and

means for returning said collateral to said short seller upon said return.

20. A transaction method, comprising:

identifying a first investment to be hedged;

estimating a performance of said first investment;

identifying a group of bank loans available for shorting;

identifying a desired performance of a hedged portfolio consisting of said first investment and a short position in at least one of said bank loans in said group of bank loans; and

constructing a hedged portfolio providing said desired performance.

21. A transaction apparatus, comprising:

a processor; and

a memory in communication with said processor, and storing instructions causing said processor to

receive information identifying a first investment to be hedged;

estimate a performance of said first investment;

identify a group of bank loans available for shorting;

identify a desired performance of a hedged portfolio consisting of said first investment and a short position in at least one of said bank loans in said group of bank loans; and

construct a hedged portfolio providing said desired performance.

22. A transaction method, comprising:

identifying an investment position to be hedged;

identifying at least a first bank loan having a desired attribute;

lending said at least first bank loan to a short seller in exchange for collateral; and

investing said collateral to hedge said investment position.

23. The transaction method of claim 22, further comprising:

repurchasing said at least first bank loan at an end of a period; and

returning said collateral.