Results
Enhanced Leverage
Increased advance amount by over $30 million.
Efficiency Gains
Reduced loan allocation time from 11 manual hours to 3 automated minutes.
Problem
Navigating complex credit facility agreements is challenging due to both their intricate nature and the constraints of manual processes.
Solution
Use sophisticated technology that automates loan allocation, achieving optimal leverage through user-defined criteria.
Background
HarborSec Financing has over 50,000 loans across several facilities, exercising 80% of its credit limit. In response to evolving market dynamics, HarborSec Financing sought to reduce financing costs and bolster liquidity. HarborSec Financing enlisted dv01 to help yield the maximum possible advance amount on its credit facilities by automating its current loan allocation workflow. This in turn, would allow the issuer to originate more loans.
Throughout the process, facilities underwent amendments, pledged loans were shifted—some loans were purchased, some were sold, and some were securitized.
Standard Practice Constrained by Human Capabilities
HarborSec Financing has over 50,000 loans across several facilities, exercising 80% of its credit limit. In response to evolving market dynamics, HarborSec Financing sought to reduce financing costs and bolster liquidity. HarborSec Financing enlisted dv01 to help yield the maximum possible advance amount on its credit facilities by automating its current loan allocation workflow. This in turn, would allow the issuer to originate more loans.
Throughout the process, facilities underwent amendments, pledged loans were shifted—some loans were purchased, some were sold, and some were securitized.
dv01’s Approach: Transform Constraints into Opportunities with Technology
Tasked with increasing HarborSec Financing's borrowing capacity, dv01 translated credit agreements into a mathematical equation. By inputting loan data points and solving the equation, dv01 determined the optimal leverage. Upon onboarding, dv01 discovered that systematically testing loan attributes across all facilities concurrently produced more robust and consistent outcomes compared to relying on intuition alone. Using its leverage optimization tool, dv01 increased leverage by over $30 million—a welcomed amount by HarborSec Financing. Amid ongoing facility amendments, the dedicated HarborSec Financing analyst devoted 11 manual hours to allocate loans, whereas dv01 achieved it in just 3 automated minutes.
Over-Collateralization
To achieve a desired aggregate advance rate, loans were pledged in excess. dv01 optimized this process, enabling the issuer to pledge fewer loans while attaining an even higher advance rate.
Under-Utilization
Loans were pledged to facilities without considering the optimal advance rate. dv01's comprehensive analysis compared loans, maximizing the total amount that could be borrowed against.
Risk Vulnerability
Excess concentration tests excluded inactive loans, such as those pledged to a securitization. As a safeguard, dv01 conducted excess concentration tests, identifying loans that would breach the set thresholds.
Bottom Line—dv01's Value Extends Beyond Loan-Level Reporting
Issuers and investors alike can leverage dv01’s comprehensive insights and analytics to make informed decisions, enhance risk management strategies, and optimize portfolio performance. As illustrated in the case of HarborSec Financing, dv01's expertise not only resolved specific challenges but also contributed to the overall efficiency and effectiveness of warehouse facilities. With a proven track record, dv01 stands as a reliable partner for those navigating the complexities of structured products, offering a robust platform that transcends traditional reporting, empowering stakeholders to navigate the financial landscape with confidence and precision