Case Studies » Novation Case Study

The brief:

The Paris subsidiary of a European bank decided to close down its equity and debt derivatives businesses and novate outstanding transactions to its Head Office. The debt derivatives side started this process using in-house staff. This was not, however, possible on the equity side and it took 2 months to identify a suitable person to spearhead this project. One month later that person pulled out.

DDL was called in at short notice in with a view to completing the equity novation exercise fully within 3 months.

The solution:

After scrutinising the necessary records, DDL found that some 1000 trades needed to be novated with 35 counterparties. 750 of these trades were with 5 counterparties.

DDL assembled a team of 5 people (a DDL project manager, 2 from the bank's Paris office and 2 from its London office). It was important to keep the Paris office people fully engaged and enthused as they would lose their jobs at the end of the novation process. This was a problem at first but when they understood that their future employment prospects were better if they adopted a work mentality during this project they soon became more helpful and at the end of the project treated the rest of the team to lunch!

All counterparties were contacted and sent Novation Agreements and Schedules of deals six weeks before the deadline with a request to advise any comments or to sign and return by 3 weeks before the deadline.

Weekly reports were issued and a weekly Novation Progress Committee was held. Special focus was put on obtaining agreement with the 5 major counterparties well before the novation deadline. The last few weeks of the project were even more intensive than the first few and of course involved trying to persuade French counterparties to negotiate during their traditional holiday month of August when staff are fewer in number in their offices

The result:

All Agreements were received from equity counteparties by the deadline. Despite starting nearly 3 months after the debt derivatives novation team, DDL was able to complete its part of the project before them.

As we offer a completely confidential service, our policy is not to disclose our clients by name. However, the case studies on this website indicate the range of institutions for whom we have worked.