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What is Euro commercial paper (ECP)?

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Euro commercial paper (ECP) is a short-term, unsecured, unsubordinated bearer promissory note issued in Eurocurrency in interest-bearing form and quoted on an add-on basis, commonly with maturities of 30, 60, 90 and 180 days, up to one year, paralleling maturities of interbank deposits.  Because of its longer maturity, ECP is traded more often in the secondary market than US commercial paper (USCP), which investors typically buy and hold to maturity.  Unlike USCP, ECP is not usually supported by a back-up line of credit.  ECP generally requires a credit rating.

ECP is denominated in all major currencies, but most issuing occurs in USD and EUR.  ECP is chiefly used to fund foreign currency denominated working capital requirements and as an alternative to obtaining short-term foreign currency funding from commercial banks.  ECP issuers include companies, financial institutions, governments and public entities with sovereign risk.  Corporate groups and financial institutions with international operations often centralize their group cash management through a financial subsidiary that issues ECP.

 

ECP Market Maturity Profile
Days
CURR  1-7  8-24  25-44  45-74  75-105  106-164  165-194  ≥195
 EUR 5.98% 16.49% 12.47% 17.50% 10.96% 18.23% 4.59% 13.78%
 GBP 6.40% 18.55% 16.05% 18.09% 13.05% 18.47% 2.76% 6.63%
 USD 7.09% 18.39% 12.11% 20.73% 18.49% 9.79% 5.71% 7.69%
Total 6.57% 17.70% 12.84% 19.13% 14.85% 14.25% 4.85% 9.80%
At the end of July 2017, 86 days was the weighted average days to maturity (DTM) of all outstanding ABCPs (in €, $, £) with DTM between 1 and 365 days.
Source: Euroclear Services

Although offered either directly by the issuer (direct paper) or through dealers on a best-efforts basis (dealer paper), most ECP is dealer placed.  Unlike the US domestic CP market, which is dominated by only a few dealers, numerous dealers are active in the ECP market.

A Euro commercial paper program is a standardized issuance platform for Euro commercial paper (ECP) in the public and private Euromarkets, whereby an issuer normally sets up the program using a bank as arranger and then places the paper with investors through a small group of dealers who have exclusive access to it on a best-efforts basis.  ECP programs stand in contrast to Euronote facilities, which are underwritten by a tender panel.  This gives ECP issuers the advantage of quicker access to funds than is offered by Euronotes.

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