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Evaluating Asset-Backed Commercial Paper

The asset-backed commercial paper (ABCP) credit process for the Global Cash Management incorporates an analysis of the following

  • Sponsor/administrator
  • Servicer
  • Underlying assets
  • Investment guidelines
  • Structure
  • Credit enhancement
  • Liquidity provider

In analyzing a program, an in-depth due diligence is performed by our Credit Research team on the conduit sponsor/administrator and servicer, including a review of ratings, operations, systems and financials. Underlying assets are evaluated with respect to the following metrics: asset industry type, collateral, asset ratings, seller ratings, loss coverage and historical performance. A review of the investment guidelines, eligibility criteria and conduit structure is conducted to determine the risk tolerance of the conduit and the rights of the ABCP investor. The final element of analysis includes an assessment of the credit enhancement levels of both the underlying assets and programs, and a review of the liquidity provider. The credit decision is highly dependent on the strength of the liquidity provider (often a systemically important bank) as it is ultimately responsible for repayment of ABCP in the event of a liquidity crisis or market event.