Raising debt and equity online will become easier if software developed by quasi-newcomer i-Deal LLC is successful. The software provides a broker-neutral platform that can link the disparate backroom systems of corporate issuers and investment banks. Although the New York-based company is less than a year old, its pedigree is impressive: Merrill Lynch, Citigroup’s Salomon Smith Barney, Microsoft, and Thomson Financial are its founders and equity investors.
Most large investment houses, and some issuers, currently use proprietary Web-based systems to aid the book-building process, the practice syndicates use to help arrive at a consensus when pricing new issues. But as raising capital becomes more complex — increasingly, issues are global, multitranche, multicurrency, and jointly led — it becomes more attractive to use a standard platform, says i-Deal chief technology officer Frank LaQuinta.
The software, which is usually sold to investment banks, allows bankers to manage book building in real time, granting different levels of access to investors and issuers. Banks and issuers can then gauge investor appetite for a particular security, and arrive at an optimum price, using the Internet’s whizbang efficiency rather than a combination of old-fashioned phone, fax, and E-mail systems.
Freddie Mac, a giant issuer of corporate bonds, will be the first issuer to test-drive the software. Jerome Lienhard, Freddie Mac’s senior vice president of investment funding, expects to move the company’s long-term debt syndication process — it will issue more than $175 billion this year — from in-house spreadsheets to the i-Deal platform later this year. But he still isn’t sure which bank will lead the cybersyndication.
The benefits for issuers are greater transparency, accuracy, and efficiency — though how much of the cost savings banks pass along remains to be seen.