Understanding Bid Wanted In Competition (BWIC): Mechanics, Applications, and Industry Trends
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Summary:
Bid Wanted in Competition (BWIC) is a strategic process utilized by institutional investors to evaluate market values discreetly. This article explores the mechanics of BWIC, its applications in various asset sales, and recent industry shifts towards automation, particularly in major banks like Citi and Bank of America.
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Understanding the mechanics of bid wanted in competition (BWIC)
Bid wanted in competition (BWIC) stands as a crucial tool for institutional investors, providing a formal mechanism to solicit bids on a specified package of securities from diverse dealers. The primary objective is to assess the market value of assets without immediately revealing a change in financial strategy.
The BWIC process
The process initiates with an institutional investor issuing a formal bid-wanted announcement, inviting bids from multiple dealers. This strategic move allows the investor to gain insights into the current market prices for the specified securities. Subsequently, the investor contacts the highest bidders to finalize a deal.
Applications in bond and currency sales
While BWIC finds applications in various asset classes, it is particularly prevalent in bond and currency sales. This method offers sellers a higher level of privacy, as it does not immediately disclose significant changes in their financial positions.
Advantages of bid wanted in competition (BWIC)
Privacy for sellers
BWIC provides sellers with the advantage of maintaining confidentiality regarding major changes in their financial positions. This discrete approach is especially valuable for institutional investors who may be strategically shifting their portfolios.
Efficient asset offloading
The structured nature of BWIC allows institutional investors to quickly offload assets and generate cash. This capital can be subsequently reinvested in new primary market deals, aligning with evolving investment strategies.
Examples of bid wanted in competition
In 2019, Park Square gained attention by initiating one of the largest BWICs, putting a €416m-equivalent loan and bond portfolio on the secondary market. The BWIC included prominent names such as Terreal, Springer, Verisure, and Kronos.
The year 2021 witnessed major banks like Citi and Bank of America announcing plans to automate the BWIC process. This technological advancement aims to streamline data compilation in the collateralized-loan obligation (CLO) market, significantly reducing the time spent on BWIC lists.
Automation in major banks
Citi and Bank of America’s initiative to automate the BWIC process reflects an industry-wide shift toward efficiency. This move aims to centralize data on CLOs, addressing increased demand and reducing the time spent on compiling bid lists by up to 80%.
Frequently asked questions
Is BWIC exclusive to bonds and currencies?
While commonly associated with bond and currency sales, BWIC can be applied to various asset classes where institutional investors seek competitive bids.
How does BWIC benefit institutional investors?
BWIC allows institutional investors to discreetly assess market values, efficiently offload assets, and generate cash for potential reinvestment.
Key takeaways
- Bid Wanted In Competition (BWIC) is a formal process used by institutional investors to seek bids on a package of securities.
- Privacy for sellers is a significant advantage of the BWIC process, allowing discreet assessment of market values.
- BWIC facilitates efficient asset offloading, enabling institutional investors to generate cash for potential reinvestment in new primary market deals.
- The process is commonly applied in bond and currency sales, providing sellers with a higher level of confidentiality.
- Major banks, including Citi and Bank of America, are exploring automation of the BWIC process to enhance efficiency and reduce time spent on bid lists.
- Examples like Park Square’s €416m-equivalent loan and bond portfolio BWIC highlight the significance of this method in the financial industry.
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