For nearly 20 years, Seth Dancy has been deeply immersed in the syndicated loan space, most recently serving as Executive Director, Global Head of Loan Services at UBS. Prior to the UBS acquisition of Credit Suisse, he served as a Director and Head of Americas Syndicated Loan Operations. Dancy joined Credit Suisse in 2006 and remained with the company through the acquisition until 2025.
Here, he shares his insights into the evolution of the syndicated loan market, where he sees it going in the future, and how LexLoan™ is helping to make the industry more efficient and productive.
Can you tell us briefly about your career so far in the syndicated loans world?
Talking about the history of syndicated loans never gets old for me. I majored in finance as an undergrad, and we studied nothing about syndicated loans while I was in college. When I graduated in 2006, Credit Suisse, which is now UBS, was ramping up a Center of Excellence in Raleigh, N.C. I joined Credit Suisse’s syndicated loans team in the “silo” called agency servicing, and my career in the space grew from there. This asset class is fascinating, and working with it has allowed me to more fully understand banking, interact with clients, learn about financial software, and become deeply entrenched in the dynamic between all the various players.
Within this business, there is a lot of thought that goes into the optimal target operating model, and location strategy is an important consideration. Syndicated loans require large teams to support them, with high overhead costs, and that ends up having a huge impact on the financial plan. The challenge is being able to find the right mindset with the right skills with an element of the client-facing dynamic, while creating a brick-and-mortar operation, all at a cost that maintains a financially sustainable model. It is also a business where the ability to “follow the sun” makes a significant difference. Quick turnarounds are a distinct advantage. Europeans staffing a U.S. book have a lot of upsides, and staff in Asia offer advantages for both Europe and North America, for example.
How have you seen the industry develop, what are the challenges you have seen in the market, and how have these challenges been overcome?
For many years, there was limited success in driving change. The systems and processes were simply too complex, entrenched, and siloed. Syndicated loans represent a unique type of financial transaction, and one that takes far longer to execute than many others. Consider that if you want to buy stock in a certain company, you can do so almost instantly. However, it takes on average 21 days to execute a secondary loan assignment. Financial organizations are consistently trying to reduce execution times to drive liquidity and reduce risk and cost.
Unlike with other types of financial transactions, fintech has had limited impact on syndicated loans. What’s different in the last three to five years is that a consortium of large Tier 1 banks have come in with technology investments to help these fintechs centralize what has always been disjointed. With this centralization capability, the middle and back-office functions will be able to operate and collaborate much more efficiently and drastically reduce settlement times. And these fintechs are making progress. In the next few years, technology will help to automate many of the currently manual processes while shortening cycle time and it will also reduce risk profiles and risk appetites. Banks are also pumping a great deal of money into GenAI, and there are many, many opportunities to leverage it in the syndicated loan space. The industry, including LSTA , is seeing real promise in advancements like chatbots that will be able to answer questions from investors, which a person would normally do one-by-one. AI will have an enormous ability to enable automated and self-service solutions for a lot of what a human is required to do now.
One thing that makes this application of technology not just nice but a necessity is the continually growing complexity and changing nature of the underlying credit agreements. Major events like BREXIT and the cessation of IBOR have embedded more complexity into these agreements. Meanwhile, syndicated loan groups are also getting much larger, and the number of participants continues to increase exponentially. But they still must continue to operate on a platform that isn’t evolving to meet the moment. That in and of itself is probably the single largest challenge, which technology will solve in the coming years.
How has your experiences been with service providers in this area in general, how have they evolved, and what does the road ahead look like?
Identifying specialized talent in this industry is a continued challenge most banks face. That is particularly problematic, considering the relatively large size of teams you need to hire. When people managing these deals don’t truly understand the intricacies inside out, the risk profile is enormous, and the banks become exposed very quickly. Cultivating this type of experience is hard because new hires don’t tend to see this space as a long-term career opportunity. So, if it takes roughly 2.5-3 years of on-the-job training for someone to start adding a high degree of unilateral value, it is key to find a labor pool that is excited about this work and dedicated to it for the long term. This is where providers like LexLoan™ have come in to fill the gaps.
You often see buy-side institutions hire custodians and trustees to support this process, which has driven the need for a lot of vendors and vendor-based talent. When a vendor has built a solid team, they can hit the ground running and minimize risk. The demand for vendor-based talent has definitely increased, and this can lead to an influx of service offerings from vendors not truly focused on syndicated loans or without access to the kind of experienced talent pool necessary. When these kinds of vendors are engaged, it often isn’t long until the “bring this back in-house” discussion ensues. The importance of subject matter expertise and training for vendor teams cannot be underestimated.
Can you talk about your experiences with UnitedLex’s LexLoan™ and how does that stand out in an increasingly crowded vendor market?
I first began working with LexLoan™ around 2011, when many of our in-house team moved from Credit Suisse into the vendor-led operation. My view is that from the beginning, LexLoan™ was set up for success with that foundation of knowledge, tenure, and connectedness in the industry. Right out of the gate, they got it right and were able to deliver.
The amount of training and expense that LexLoan™ puts into developing its team is unique and impressive in this space. They have continued to run their business in such a way that they are very closely connected to the culture of the client they are supporting. They are an extension of the team, with access directly into systems and the ability and capability to do things in real time.
For example, during COVID when volatility in the markets was high, we turned to LexLoan™ to provide more support and they dove right in. I’m still amazed how well they executed, particularly at a time when market volatility was much higher than the norm. Quite frankly, they got it done.
Where do you see the syndicated markets headed in the next few years and the role service providers will play? What trends do you see emerging in our current regulatory and economic climates?
The dynamic of where we are today will likely continue until we start to see the rollout of what the fintechs are building-–in the next two to three years, a lot of that ROI will start to kick in, with the central hub and information sharing coming online. With that, there is massive opportunity to reduce trade execution times. Personally, I feel that in three to five years, we’ll see the timeline for trades that currently take 20-plus days to execute being significantly reduced. Reducing settlement times will be the single largest contributor to ROI in this space.
Additionally, regulation in this space, especially within the LMA market, is increasing and becoming more complex. Oversight is focused on ensuring that leverage and risk levels remain appropriate, helping to prevent potential ripple effects across financial markets. Related to this, private equity is getting into syndicated lending. It’s becoming far more attractive to non-banks to get involved, driven by less regulatory scrutiny. They can arrange deals without having to reserve an enormous amount of capital on the balance sheet. So, the regulations continue to evolve. It’s becoming more and more difficult for banks, and more of this business is going to private equity.
All of this complexity, increased scrutiny, and opportunities presented by the technology that is on the horizon will inevitably mean that service providers in our space who are not operating with exceptional acumen and quality may not make it. And those who do will be more invaluable to their clients than ever before. I look forward to seeing what this melding of great people, excellent process, and capable technology will do for syndicated loans in the near future.
To learn more about LexLoan™ and its unique global delivery model that provides comprehensive support through the entire syndicated loan lifecycle with unrivaled knowledge and market leading expertise in all leading syndicated loan technology and emerging platforms with best-in-class service and significant cost savings, visit www.unitedlex.com/lexloan/
