Secured money market paper

A collateralized commercial paper or asset-backed commercial paper (short ABCP) denotes a with assets padded ( " collateralized ") commercial paper (English commercial paper , CP) and an application of the securitization of claims. The originators receive liquidity for the sale of their portfolio of receivables . The default risks are transferred via the money market.

The receivables are usually sold to a so-called conduit (issuing company), which CPs issues in a kind of continuous issue in order to refinance the purchase price of the receivables . The conduit exists permanently and repeatedly buys receivables and issues securities several times in a row. These are usually commercial paper secured by the purchased receivables , i.e. short-term, unlisted bonds with a maturity of max. 360 days (30–90 days are common). The chosen maturity depends on the cash value or the circulation speed of the underlying receivables. Unlike ABS, there are no tranches with ABCP, so the securities are not divided into classes.

The conduits usually bundle the purchased receivables from several companies. This has the advantage that the volume of receivables from the individual companies does not have to be so large. For securitization using ABCP, receivables that fall due in the short term are particularly suitable, for example due to services already performed, in particular receivables from credit card companies, from consumer loans, car loans, student loans and leasing contracts.

Normally conduits are supported by larger banks (consortia), which, if necessary, the required liquidity for the payment when due of the CPs in the form of a special line of credit ( liquidity line , Eng .: Liquidity- or CP backup facility providing called) if there are payment difficulties. This can happen, for example, if new CPs cannot be placed on the market or cannot be placed in sufficient quantities on the market and there is therefore no liquidity to replace due CPs. The latter can be the case in the event of market disruptions. Without such a liquidity line, the rating of such CPs would be worse, which in turn affects the interest rate or discount .

Footnotes

↑ Wolfgang Münchau: Meltdown in the financial system . Carl Hanser Verlag , Munich 2008, ISBN 978-3-446-41847-9 , pp. 13 .
^ ^A ^b ^c Stephan Schöning, Jan Christian Rutsch: Financing through Asset Backed Commercial Papers. In: WISU - Das Wirtschaftsstudium, 40th year (2011), pp. 523-527. Retrieved January 19, 2016.
↑ See the Bundesbank's capital market statistics .

↑ If necessary, Medium Term Notes (MTN) with a term of up to 24 months are issued.

^ Joachim Prätsch, Uwe Schikorra, Eberhard Ludwig: Finance Management. Springer-Verlag, Berlin 2007, ISBN 978-3-540-70786-8 , p. 184 f.

↑ Such as B. most recently through the crisis ( financial crisis from 2007 ) on the US subprime market for mortgage loans in the summer of 2007, which also caused problems for IKB because it had a substantial liquidity line for a conduit (the Rhineland Funding Capital Corporation) held ready.

[1] Wolfgang Münchau: Meltdown in the financial system . Carl Hanser Verlag , Munich 2008, ISBN 978-3-446-41847-9 , pp. 13 .

[WISU-2] A ^b ^c Stephan Schöning, Jan Christian Rutsch: Financing through Asset Backed Commercial Papers. In: WISU - Das Wirtschaftsstudium, 40th year (2011), pp. 523-527. Retrieved January 19, 2016.

[3] See the Bundesbank's capital market statistics .

[4] If necessary, Medium Term Notes (MTN) with a term of up to 24 months are issued.

[5] Joachim Prätsch, Uwe Schikorra, Eberhard Ludwig: Finance Management. Springer-Verlag, Berlin 2007, ISBN 978-3-540-70786-8 , p. 184 f.

[6] Such as B. most recently through the crisis ( financial crisis from 2007 ) on the US subprime market for mortgage loans in the summer of 2007, which also caused problems for IKB because it had a substantial liquidity line for a conduit (the Rhineland Funding Capital Corporation) held ready.