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$900 million blunder could worsen – Industry roundup: 17 June

Citi's US $900 million Revlon blunder could worsen

Citigroup's payment error to Revlon Inc. lenders surfaced in the cosmetics giant's bankruptcy in less than a day. Two years ago, the bank wired the entire balance of a US $900 million loan rather than just the interest and then failed to recover the majority of it when investors claimed Revlon was in default and should have repay them regardless. According to court document, this could stymie the company's restructuring plans. The issue is that it is unclear who, if anyone, has the right to repay the remaining $500 million in loan principal, which is embroiled in a legal battle over the accidental transfer.

Citigroup said it assumed rights as a creditor to the troubled company after losing the first round of the battle with lenders who kept the erroneous payment last year. However, Revlon has hinted in regulatory filings last month and bankruptcy court filings this week that Citigroup's claim to the funds is not certain, opening the possibility of yet another confounding debt dispute.

According to Eric Talley, a Columbia University law professor who has studied the Citi-Revlon debacle, Revlon would prefer that this debt be completely erased from its books and transfer responsibility to Citibank. Additionally, Talley states that although the so-called subrogation rights Citigroup asserts it has over the principal of the $500 million loan are a common idea in insurance law, they have not been extensively tested in the financial realm. Despite the scant precedent that currently exists, which certainly favours Citigroup, Revlon's poor financial situation surely makes even a remote possibility of wiping out the debt worth considering, he added.

Revlon stated that it "reserves all rights and defences with respect to any claim Citibank may assert against" the business if Citigroup finally fails in its attempt to recover the funds.

If Citigroup's claim is successfully contested, over 15% of Revlon's $3.4 billion in debt might be instantly written off, easing the company's road out of bankruptcy. According to Bloomberg Intelligence analyst Phil Brendel, the odds are against Revlon and may run the risk of severing the company's relationship with Citigroup.

CrossBoundary Energy Access secures US $25 million in funding for solar-powered mini-grids in Africa

CrossBoundary Energy Access (CBEA), Africa's first project financing facility for mini-grids, has raised US $25 million in new funding commitments from ARCH Emerging Markets Partners Limited, Bank of America and Microsoft Climate Innovation Fund. This investment will reportedly leverage another $25 million in senior debt to invest $50 million in CBEA's near-term pipeline of solar-powered mini-grids.

According to reports, CBEA plans to invest a total of $150 million over the next two years to provide sustainable electricity to a million people in Africa. The mini-grids reportedly use solar and batteries to deliver grid-quality power to homes and businesses on a continuous basis. Individual local residential and small business subscribers will be able to access renewable electricity for the first time. Reports indicate that these solar-powered mini-grids will aid in bringing clean electricity to rural African areas that currently lack access to electricity.

The International Energy Agency (IEA) estimates that the solar mini-grid sector will require $187 billion to achieve universal energy access by 2030. According to CBEA, project finance is critical to unlocking the long-term, infrastructure-type capital required by the mini-grid sector. CBEA launched its blended project finance structure in 2019 with funding from the Rockefeller Foundation, Ceniarth, the DOEN Foundation, the Shell Foundation and UK Aid.

The IEA states that more than 600 million Africans lack access to electricity. This slows economic growth, productive investment, job creation and poverty alleviation. The report states that CBEA's blended finance approach establishes a new model for funding rural electrification in Africa, bringing renewable energy to one million people once the target $150 million is fully deployed.

Amy Brusiloff, Community Development Executive for Environmental, Social and Governance, Bank of America, also stated that “this innovative blended finance structure by CrossBoundary Energy Access aggregates renewable energy mini-grid projects to achieve scale and reduce risk, which more readily enables large institutions to invest.”

Visa brings P2P to Sri Lanka, enabling cashless personal payments

Visa has introduced person-to-person (P2P) payments in Sri Lanka, enabling individual consumers to initiate and receive payments digitally, in real time. Digital transactions continue to increase across multiple platforms, with the total value expected to reach US $5,317 million by later 2022. By enabling real-time digital access across payment gateways and smart devices, cashless service delivery levels are being transformed, according to reports.

In line with the regulator's efforts to drive digital transactions, Visa's new service reportedly enables card-to-card transactions with speed, security and convenience for the user. Consumers can use Visa Direct to make payments directly to another Visa card using card credentials via the P2P facility.

Avanthi Colombage, Country Manager for Sri Lanka and the Maldives, Visa, commented that this enables them to manage digital money transfers between two parties in real time. It is also said to improve mobility and access to cashless payments across multiple segments. Additionally, this Visa Direct solution could enable and improve bank-to-bank transfers, credit card bill payments, use of digital wallets, transfers on social media and bulk fund disbursements in the near future, transforming the payment landscape in Sri Lanka.

Reports indicated that while Sri Lankan banks can now provide the service to their customers through bank apps, internet banking, ATMs or branch counters, fintechs can also provide the service to a diverse range of consumers through fintech apps. With the continued growth in digital transactions, Visa expects P2P transactions to exponentially grow transfers between individuals due to the inherent ease of transferring funds in real-time from one Visa credential to another. This will be in addition to the increasing person-to-merchant (P2M) payments that consumers are used to receiving via Visa QR and other form factors.

Structured credit electronic trading platform, Octaura, via multi-bank and data analytics alliance

Major banks Citi, Bank of America, Credit Suisse, Goldman Sachs, J.P. Morgan, Morgan Stanley, Wells Fargo and Moody's Analytics have launched the formation of Octaura Holdings ("Octaura"), an independent company whose mission is to establish the first open market electronic trading platform for syndicated loans and collateralized loan obligations (CLOs).

Octaura, which was created in collaboration with Genesis Global, a low-code software development platform for financial markets, aims to provide comprehensive trading solutions with integrated data and analytics. The Octaura loan trading venue will be the first to open, followed by the CLO trading venue. The company intends to expand into other credit-related products.

The introduction of Octaura's cutting-edge technology comes at a time when the CLO and syndicated loan markets have more than doubled in size over the last decade, to more than $1 trillion and $1.4 trillion in outstanding notionals, respectively. Octaura is said to offer electronic trading protocols for price negotiations, straight through processing (STP) for trade booking, and data and analytics functionality provided by Moody's Analytics in a single solution. With the expansion of liquidity sources, a significant proportion of the investor base will have lower barriers to entry and ultimately support both primary and secondary markets.

Reimagining the collections and payments industry: Webio secures US $4M in funding to scale conversational AI

Finch Capital, Ireland-based start-up, led a series A funding round for Webio, a conversational artificial intelligence (AI) provider in the credit, collections and payments industry. It plans to use the new $4M in funds to expand its capabilities in conversational AI and other digital offerings and grow its team to meet market demand in the UK and European markets.

Webio's technology has enabled UK and European companies to communicate with customers in a conversational manner throughout the credit and collections process. Customers can reportedly use Conversational AI and automation to ask questions, change payment dates, or create a new repayment schedule that is tailored to their specific needs, resulting in better adherence to repayments.

Webio's ability to “move the needle” in predicting conversation outcomes by analysing what is said and how it is said has been called a significant achievement. A critical capability in this market is identifying characteristics such as a person's potential vulnerability first and accurately, and then guiding customer conversations through a range of best next steps.

Money-related conversations are challenging and difficult for both the customer and the agents who are tasked with having these conversations. Cormac O'Neill, Co-Founder and CEO, Webio, commented that “going digital allows businesses to create a whole new set of digital experiences that help customers feel more confident in having those difficult conversations, ultimately preventing them from falling into unnecessary and significant financial difficulty.” Furthermore, O’Neill added that they are growing at a rate of more than 100% year-on-year and hope to double their staff in the next six months with this investment, as well as seeking additional capital to enter new markets.

Credit and collections functions have historically received little technological attention, but digital transformation is now a requirement. The number of financial services organizations implementing conversational AI and digital assistants has more than doubled over the pandemic, and Webio's privacy-first custom assistant model is gaining traction in the collection's world.

Between the current economic environment’s impact on individuals and the dramatic rise of BNPL and other alternative payments, all businesses will face increased late payments, bad debt, and cash flow pressure, reports state. Companies are realizing that they need a strategy for serving these customers with care and empathy, and many are hopeful that conversational AI options such as Webio can help.

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