Telefónica Deutschland and LBBW rely on blockchain technology

Telefónica Deutschland is working with LBBW and DZ Bank on a joint promissory note transaction with a volume of 200 million euros. The transaction is intended to demonstrate for the first time the performance of the blockchain in combination with a traditional financing process and a larger number of investors.

Telefónica Deutschland, Landesbank Baden-Württemberg (LBBW) and the cooperative central bank DZ Bank announced on Thursday that a promissory note loan with a target volume of 200 million euros had been launched. The special feature of this is that a block tranche is being used exclusively by LBBW's exclusively marketed tranche.

For the first time, a broad range of investors will participate in blockchain financing, and the necessary technical infrastructure has already been implemented by interested lenders in advance. "With this transaction, we want to show that the intelligent use of digital technology leads to more efficient processes," said Markus Rolle, CFO of Telefónica Germany. Role also stated "to gain valuable experience applying the blockchain in other business areas".

In the summer of 2017, LBBW had already used a blockchain for the presentation of a financial transaction together with carmaker Daimler. At that time, Daimler placed a promissory note loan of more than EUR 100 million with LBBW via three LBBW banks and LBBW. The entire transaction, together with the IT subsidiaries TSS (Daimler) and Targens (LBBW), has been completely digitally mapped on a blockchain, from initiation through placement, allotment and contract conclusion to interest payment and repayment confirmation.

According to LBBW and Daimler, promissory note loans with their long value chain are an ideal use case for the blockchain because this instrument can replace previously labor-intensive manual process steps with digital processes. Daimler and LBBW see similar efficiency potential, for example, in syndicated loans or export finance.

Kurt Schäfer, Head of Daimler Treasury, explained: "Blockchain can affect nearly the entire value chain. That's why, as a leading automaker, we want to be an active part of the global blockchain community and help shape cross-industry blockchain standards in all of our key areas of application: customer relationships, trading and distribution, supplier management, digital services, and financial services. "

According to LBBW, more and more companies - including medium-sized companies that are too small for the capital market - use promissory note loans as an alternative to financing instruments such as bank or syndicated loans. "The promissory note is gaining importance for many companies - especially as an option to issue bonds," explains LBBW analyst Hans-Peter Kuhlmann: "The main advantages of the promissory note loan are the low spreads, the distribution of the tranches over different maturities and lower transaction costs and liabilities no need for publicity obligations. "

According to LBBW, the market for corporate Schuldscheindarlehen (SSD) reached the previous year's record level of EUR 27 billion in 2017, and the outstanding market volume of all promissory note loans increased by around EUR 17 billion to more than EUR 100 billion. The number of emissions rose to a new record. LBBW now wants to make the promissory note loan as a financing instrument for companies and investors even more attractive with the help of Blockchain.