Asset-backed Commercial Paper

A collateralized commercial paper and asset-backed commercial paper refers to a underlaid with assets ( " collateralized " ) money market paper (English commercial paper, short CP) and an application of the securitization of receivables. The seller of the receivables ( Originator ) received for the sale of its portfolio of receivables liquidity.

The receivables are sold here mostly to a so-called Conduit (emissions company), which CPs emitted in a kind of perpetual issue to refinance the debt purchase price. These are generally collateralized by the purchased receivables commercial paper, that is, short-term, unquoted debt securities with a maturity of max. 360 days (common are 30-90 days ). The selected due date depends on the present value or the velocity of circulation of the underlying receivables.

Normally conduits are supported by larger banks ( consortia ) that if necessary, the required liquidity for the payment obligations at maturity of the CPs in the form of a special credit line: deploy ( liquidity line, Eng called Liquidity or CP backup facility. ) If it comes to payment difficulties. This can for example occur if new CPs can not be placed in sufficient quantity in the market or not, and thus the liquidity missing for refinancing of CPs. The latter may be the case in the event of market disruption. Without such a liquidity facility in the rating of such CPs would be worse, which in turn affects interest rates or discount.

Footnotes

• Investment
• Lending business