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Volvo’s Origin-al bond issuance signposts road to the future

Published: Sep 2024
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Best Emerging Technology Solution

Highly Commended Winner

Volvo AB

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Volvo Group is a Swedish multinational manufacturing corporation headquartered in Gothenburg. Its core activity is the production, distribution and sale of trucks, buses and construction equipment. Volvo also supplies marine and industrial drive systems and financial services.

The challenge

It’s the most important source of finance in the world but the tedious back office process behind corporate bond issuance hasn’t changed for decades. From origination to pricing and settlement, it involves manually putting data into documents, sending emails and updating systems in an undertaking that is repeated across multiple individuals and teams in front, middle and back offices, as well as legal. It can take five days between a bond being launched in the market and the cash arriving in the issuer’s bank account.

Now, thanks to companies pioneering new technology, the process behind financing, is changing. Companies like Volvo, issuing debt using a new digital bond platform for the first time, are leading the way.

The solution

Last May, Volvo completed a dual tranche €1bn syndicated benchmark bond issuance on Origin, a platform designed to digitise the primary issuance process. Preparing, reviewing, signing and distributing the transaction documents, like the term-sheet, pricing supplement and subscription agreement can take days. But Origin’s platform transforms the process around preparing the documentation and sharing the data contained within the documentation, making it faster, cheaper and more efficient.

Origin connects market participants with market infrastructure to digitise and automate the bond issuance process, so that complex flows are streamlined and manual processes are eliminated. Volvo’s syndicated benchmark followed a private placement transaction in 2021, also issued via Origin. As of today, Volvo, have completed two private placements and four benchmarks via Origin.

“Volvo’s capital markets presence in recent years has increased in line with the growth of the underlying business. That means we are a frequent issuer working with many banks. We are issuing very standardised products with a post trade process that hasn’t changed for decades. Origin offers us a way to efficiently standardise these processes and bring them to the digital era. Having seen draft trade documentation ready just a couple of hours after bond pricing really made me aware of the opportunity to improve efficiency,” said Danijel Afolter, Portfolio Manager at the Volvo Treasury AB.

Best practice and innovation

Volvo’s transaction marked the first truly syndicated bond issuance on Origin and pulled together multiple banks and law firms to collaborate. Origin’s platform was used as part of the documentation process and to prepare the initial term sheet, as well as the final terms, subscription agreement, and the signing and closing agenda, right through to listing on the Luxembourg Stock Exchange via Origin’s digital listing API.

Rather than the entire working group collaborating over email, the transaction is now managed on a web-based platform. This means that all participants have real-time access to the latest version of any documentation. Documents are produced automatically rather than manually drafted in Word. And the data from earlier stages (eg the Termsheet) feeds through to later stages (Final Terms, digital listing) significantly reducing the time spent keying and re-keying the same information in multiple places.

This was the first time the Origin platform was used in a transaction with multiple counterparties, including bookrunners (Citi was mandated as the Documentation Bank on this transaction. The other active bookrunners included ING, Mizuho and Société Générale) as well as both underwriters’ and issuer’s counsel Allen & Overy and Clifford Chance, respectively.

Key benefits

  • Process efficiencies.

  • Increased automation.

  • Manual intervention reduced.

  • Future-proof solution.

  • Golden source of truth.

  • Reduced settlement time.

Adam Smith Awards sail

The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards

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