Global law firm Herbert Smith Freehills has advised Red Eléctrica Corporación on the world's first syndicated loan using blockchain technology. The €150 million loan was engaged from three banks: BBVA, BNP Paribas and MUFG. Negotiations were conducted quickly over the platform developed by BBVA based on DLT (Distributed Ledger Technology).
Red Eléctrica Corporación will use the 5-year loan to "cover corporate needs" and, as it is a multi-currency loan, the borrower will be able to draw down the loan in euros and in US dollars. The loan's initial margin over Euríbor is 0.325% for euro drawdowns, and 0.475% over Libor for US dollar drawdowns, which could vary depending on the company's credit rating throughout the life of the loan.
Blockchain technology offers many advantages as the number of participants in the process increases, as is the case with syndicated lending transactions. Primarily, those advantages amount to an improved experience for customers, as each step in the process is recorded using DLT. Key Information of the negotiations is shared among the participant's nodes on the private blockchain network, allowing them instant access to the status of the transaction and ensuring information traceability. Once signed, the agreement document is allocated a unique identifier number on Ethereum, the public blockchain network, to ensure that it remains unaltered for third parties; confidentiality is ensured at all times.
The transaction has been led by partners Gonzalo Martín de Nicolás (finance) and Leopoldo González de Echenique (finance regulatory).