An online auction process that cuts costs for the biggest buyers of leveraged loans has another benefit: It allows them to delay switching to a new rate benchmark when they refinance debt.

The auction allows loan buyers known as collateralized loan obligations (CLOs) to cheaply refinance the securities they use to fund their purchases. The handful of CLOs that are eligible to use this auction process can continue to tie their borrowing to the London interbank offered rate (LIBOR) instead of embracing new benchmarks that the rest of the market had to start using this year for new transactions and refinancings.

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Continuing to use LIBOR now allows a CLO to avoid dealing with potentially costly mismatches that result from having investments tied to LIBOR while borrowing at a rate connected to a benchmark like the Secured Overnight Financing Rate (SOFR). HalseyPoint Asset Management did an auction last month, and firms including Neuberger Berman, CIFC and Seix Advisors may be candidates for future deals, according to KopenTech, the financial technology firm that organized the auction platform.

Most CLOs refinance, or reset, their borrowings through a more conventional and expensive process that requires the issuer to pay fees to banks, ratings firms, and lawyers. But KopenTech allows a different process, where all that's changed is the rate the borrower pays. Other documentation and ratings stay the same, and the securities maintain the same CUSIP identifiers.