Originally published at https://rise.barclays/success-stories/h4/
H4 and Barclays: A ‘legally binding’ relationship
Incredible advances in technology have transformed the capital markets sector almost beyond recognition over the past 25 years.
But when it comes to drafting legal documents, the process has barely evolved – parties are still using systems including Word, PDF, redlining software, email and data rooms. When finalising documents, they use ‘financial printers’ (companies who specialise in printing documents for the financial services sector) and have to revert to hand mark-ups and scanners.
Yes, this is laborious, time-consuming and environmentally unsound and can also become very expensive for many large companies. On average, financial printing can cost up to $150,000 per transaction when issuing bonds. In a digital age where information is shared, amended, enhanced, stored, and distributed quicker than ever before, the industry is still using (very large) filing cabinets.
What is H4?
H4 is a full life-cycle digital platform that enhances how capital markets documents are drafted and analysed. It helps deliver digital smart documents that issuers, lawyers and underwriters can collaborate and amend in real-time.
How it works is that, once drafted, the H4 platform generates a shareable smart version of the document that is distributed to investors during the deal’s marketing phase. Furthermore, H4 has a digital library of over 4,000 historical documents available to the marketplace in a structured data format.
H4 was founded by ex-capital markets bankers who were fed up with the outdated process for document drafting.
As Miranda Staveley, Director at H4 puts it: “Huge amounts of information can be exchanged and amended at the click of a button. It’s extraordinary that lawyers are still sending hand mark-ups to printers and having to wait a few hours to review what they could have done digitally in a few seconds.
“Legal document drafting needs to be dragged kicking and screaming into the 21st century.”
Why does Barclays use H4?
H4 offers a myriad of benefits that could enhance the current system that Barclays currently uses.
It could streamline document collaboration exponentially. H4 is similar to standard distributed word-processing documents – yet H4 provides so much more.
In bond deals, H4 allows flexibility around launch timings which can ultimately save an issuer a considerable amount of time. The issuer’s counsel maintains control of the document instead of handing it to a financial printer and having to send hand mark-ups when changes need to be made. Everything is digital.
H4 also typically costs 50-75% less than a traditional financial printer and could save Barclays clients money on legal fees related to drafting.
Secure and searchable
Each transaction takes place on a virtual private ‘deal space’. This is to make it as secure as possible. Users can decide if deal members can simply review or have permission to edit.
H4 documents are also highly navigable. Users can filter search results to find specific deals and sort documents by industry, company, rating, currency, and more. It is as granular as the user wants it to be, so understanding and analysing comparable transactions is easier than ever before.
Dan Packham, Director, Barclays Ventures, says: “H4 not only streamlines the outdated existing process but adds a valuable resource for curating documents. Far from simply being editing software, it actively helps the decision-making process.”
The proprietary H4 format also features structured data. Financial information can be downloaded automatically into an Excel document, where historically they had to be laboriously typed in by hand.
And the platform provides a tailored glossary of legal and technical terms as they relate to the document, and how the lawyers define them. It helps avoid confusion. Both parties know exactly what is meant, helping to clarify and resolve disputes.
Investors receive a smart document they can digest far more easily than a 300+ page printed book.
Once a document is finalised, it can be published as an Investor Kit and an identical PDF can also be produced. An H4 Investor Kit enables investors to view a secure version of the preliminary document during book building and, after that, the final document.
H4 also features a searchable, public repository providing all market participants with a free digital library of historical bond documents. Investors can view documents they receive with H4 digital functionality and instantly compare it to the library.
Barclays is always looking for FinTech pioneers to work with and were impressed with H4 and its platform.
Dan says: “The team at H4 identified that the legal drafting process was mired in the past and could benefit from a platform that leverages all the benefits of our increasingly digital world.
“Not only does Barclays utilise H4 – it recently completed its first deal using the platform – it is also an investor. This mutually beneficial partnership demonstrates our commitment to seeking out and working with bold and inventive FinTech start-ups.”
“We’re delighted that an esteemed institution like Barclays has seen how our platform can benefit its clients,” says Miranda Staveley.
The outdated printing method currently in use for capital markets legal documents is inefficient, can be expensive and can potentially slow down deals.
It no longer reflects market reality and fails to take advantage of the opportunities of our interconnected digital economic landscape.
Barclays invested in H4’s product because identifying and collaborating with cutting-edge FinTech is part of its DNA.