Innovation Rewind: Gravity Stack's head start on LIBOR

For those that have been following along, you’ll remember back in January 2019, Gravity Stack was one of the first to bring their LIBOR solution to market and really hit the ground running. We recently caught up with Sharri Wilner to hear about how their end-to-end LIBOR solution has become not only the standard, but the most sought-after on the market.

Claire Williams | May 27, 2020

Michael Gildner // July 22, 2020

The countdown to LIBOR continues. While COVID-19 has recently become the urgent priority issue for organizations and leadership teams, there has been no adjustment to LIBOR’s December 31, 2021 deadline, when it will be officially retracted by the Financial Conduct Authority (FCA).

The FCA has made it clear that “firms cannot rely on LIBOR being published after the end of 2021.” They have however announced a small extension for new sterling LIBOR linked loans to help bolster the global economy through Q4 2020 due to the Coronavirus Pandemic. The Working Group on Sterling Risk-Free Reference Rates (RFRWG) now recommends:

By the end of Q3 2020 lenders should be in a position to offer non-LIBOR linked products to their customers;
After the end of Q3 2020 lenders, working with their borrowers, should include clear contractual arrangements in all new and re-financed LIBOR-referencing loan products to facilitate conversion ahead of end-2021, through pre-agreed conversion terms or an agreed process for renegotiation, to SONIA or other alternatives; and
All new issuance of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of Q1 2021.

Companies of all sizes and industries around the world are trying to understand how their contracts they are affected, what amendments need to be made, and perhaps the biggest question of all – where do they even start? With about $400 trillion worth of global contracts with rates tied to LIBOR and key transition milestones quickly approaching, more companies are turning to technology to save both time and money.

Sharri Wilner on Gravity Stack’s LIBOR solution in July 2019. Watch full video.

For those that have been following along, you’ll remember back in January 2019, Gravity Stack was one of the first to bring their LIBOR framework to market and really hit the ground running. Since then, they’ve been recognized at a slew of events and award shows (including the American Lawyer Industry Awards, Financial Times Innovative Lawyers Awards, Law Society Excellence Awards, 2020 Chambers, and Relativity Fest) and has been engaged in more than a half dozen LIBOR transition projects.

Sharri Wilner, Head of Client Success at Gravity Stack, has been leading the firm’s LIBOR transition services. We recently caught up with her to hear about how Gravity Stack’s end-to-end LIBOR solution has become not only the standard, but the most sought-after on the market.

Thank you for taking the time to speak to us today Sharri! Let’s start by just having you tell us about what a little bit about what Gravity Stack has been up to the past few months.

These past few months have been a roller coaster for everyone. Nevertheless, we’ve been fortunate that the majority of our team at Gravity Stack was already set up and operating remotely, so the transition to work-at-home was seamless. Existing projects have not slowed down and the COVID-19 business disruption many of our customers are experiencing has caused us to collaborate with them on the most complex business challenges across a number of areas, while also offering a variety of strategic solutions to an entirely new set of customers.

No one wants to grow their business because of a pandemic, but Gravity Stack’s revenues has grown over 25% from this same time last year. We have made growing our consulting and business advisory arm a priority, developed deeper strategic relationships with our technology partners like Heretik and Microsoft, and have spent many hours aligning with the practice groups in our parent firm, Reed Smith. I think the thing that I’m most proud of is that, while our team has traditionally applied our skills and solutions to discovery and investigations, we have made a big push to collaborating with the corporate transactions group to develop state of the art solutions for their workflow.

Of course, and we know the deadline for LIBOR hasn’t changed. How do you think companies can balance all these urgent review projects, especially given the state of global uncertainty around the COVID-19 Pandemic?

COVID-19 is causing many clients to experience challenges they’ve never faced before. As I see it, the best way for businesses to successfully navigate through all the urgency and unpredictability of these projects is by integrating automated, powerful solutions into the reviews that have previously been time consuming, costly and error prone. Heretik is one of the leading innovations that has proven to enhance our clients’ ability to effectively and efficiently store, process, analyze, and act on a business’ immediate needs; each of those four actions are a significant undertaking, especially when attempted manually. By deploying Heretik into these reviews, Gravity Stack has been able to effortlessly add new elements into any original client plans. We have been able to immediately analyze areas of risks and exposures, as well as uncover potential financial relief, all without disruption to normal business practices and without slowing down the projects that were already in motion.

Last year, the talk of the town was Gravity Stack’s new LIBOR solution. For those that don’t know can you quickly tell us a little bit about it and what makes it unique?

Gravity Stack’s LIBOR solution was born out of a client’s need to minimize the economic burden of an enormous manual review with the end goal of evaluating the financial institution’s LIBOR exposure. This initial creation intended to be an automated process map for this real-life financial business problem. As we developed an expertise with the rich language and various instruments requiring LIBOR analysis, we continued to develop more advanced solutions.

Today, Gravity Stack’s technical foundation begins with Heretik. We use the software in the Relativity platform, to support all of our LIBOR initiatives. Heretik’s significant flexibility makes it the stand out software in the industry for LIBOR review. Using Heretik allows us, to automatically extract LIBOR and fallback terms. The ability to edit an algorithm within the tool instantly provides the most accurate capturing of the alternative benchmarks. Even more so, when we unlock the full power of Heretik’s learning module, the segmentation analysis, and data extraction to choice fields, our experts efficiently and seamlessly review the data points formulated by our custom algorithms.

Play Video

Pipeline presented at Relativity Fest 2019 Innovation Awards

But capturing the clauses is really just the beginning. We provide full reporting and visualization and we can apply those features to any underlying documentation, related financial instruments, as well the amendments (people always neglect amendments!) that we assemble through Heretik’s re-papering feature, Document Assembly. Along with Heretik, we incorporate Gravity Stack’s home-grown legal project management tool, Pipeline, into all LIBOR projects. It keeps any project organized, transparent and collaborative by providing task management reporting, email notifications, version control and instant messaging.

Furthermore, Gravity Stack’s LIBOR solution has a special recipe that makes it even more powerful. Without giving away our secret sauce, here is our recipe:

Our proprietary algorithms specific to LIBOR.
Our data science experts who script and revise the algorithms within the project so we can adjust to any client collection instantly (because no two projects are the same)
Our ability to re-paper amendments to contracts at scale.
Gravity Stack’s ability to capture all the various version of the re-papered amendments in Pipeline, as the negotiation process develops.

How has Gravity Stack’s LIBOR solution been deployed since you launched it back in January 2019?

Around 18 months ago, a global financial institution approached Gravity Stack to find an economically feasible solution that could assist them in understanding their LIBOR exposure. As our knowledge of the challenges around LIBOR analysis evolved, Gravity Stack closely aligned with our industry leading partners, Reed Smith and Heretik, to help advance our offering in the industry.

To date, the collaboration with these partners has contributed to Gravity Stack’s involvement in more than a half-dozen LIBOR transition projects, including a recent engagement with one of the world’s largest financial services firms. Whether it is a tech company like Heretik or a global law firm like Reed Smith, we talk about our partners a lot, but it is those partnerships that have empowered Gravity Stack to provide our current end-to-end platform.

Additionally, Gravity Stack’s latest LIBOR model includes algorithms to accommodate the variety and diversity of the financial instruments at risk for LIBOR transition, analyze alternative rates and how they affect any party involved in the re-papering negotiation (including lenders, trustees, and borrowers), and proactively pin-points the contractual language that would trigger a fallback rate. This is critical in assessing our customers exposure.

Gravity Stack’s dedication to providing effective client solutions and working with our partners to accomplish this has brought us to where we are today – ahead of the industry with a complete and rigorous LIBOR technology solution, smarter, faster, and more agile than it was just 18 months ago.

It seems as though every LIBOR solution on the market is ‘proven’ or ‘end-to-end’, but it’s rare to ever see supporting evidence of that. How would you advise companies that are evaluating LIBOR solutions and strategies in such a cloudy market?

I continue to see the market inundated with promises of AI contract models and advanced solutions that really aren’t AI, they are not automated nor are they advanced. When evaluating a vendor’s offering, asking for real-time analysis on your firm’s contracts is critical to making decisions. Can your potential partner, at that moment, ingest sample contracts you provide, demonstrate the results and align with your strategic initiative? Gravity Stack has been asked to do this and our results have won new projects and deeper engagements. My advice would be to really get in the weeds with your vendors. Ask them for their recommended extraction points, given your institution’s position in the instrument and the types of contracts in your collection. Investigate what their collection process looks like, and the depth of their involvement on prior LIBOR projects. Inquire about the number of tools and platforms they might implement to achieve your desired results.

Look for partners that have experience with a variety of automated contract analysis solutions. Any of Gravity Stack’s offering, including our LIBOR solution, allows clients to quickly shift to any business initiative. Our intention is to create a central source of truth for the various business units, something every department in the enterprise from the office of the CFO to the GC and the COO is aspiring to achieve. A vendor that can achieve all of this is creating the building blocks for years of insight and innovation to optimize business processes in a proactive manner, while also supporting the current project needs.

Where should companies that either haven’t started or are really early in their LIBOR transition get started today?

I would tell them that it is not too late to get started, but it will be soon. Our experts work with clients to understand their digital and paper environments. They develop collection and execution plans so we can capture contracts potentially at risk for LIBOR disruption. We have a strong team of consultants who can support some of toughest problems any business unit or institution thinks they have with respect to LIBOR exposure. Gravity Stack’s experts, workflows, and end-to-end solution will assist any firm to efficiently develop negotiation strategies around LIBOR alternatives, which they have not had the time or resources to previously develop. The Gravity Stack team and our partners are committed to deploying the latest iteration of our Heretik-powered platform and providing a successful end-to-end LIBOR solution for any institution.

Sharri thank you so much for taking the time to speak with us today! For anyone interested in learning more about Gravity Stack, check out their website or get in touch directly at info@gravitystack.com.

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