Multi-Seller Commercial Paper Conduits and Securitization

Abstract

This article describes the use of multi-seller commercial paper conduits in securitization. A multi-seller CP conduit is a special-purpose entity that regularly buys interests in pools of financial assets from one or more sellers and funds such purchases by selling commercial paper notes, primarily to institutional investors. Most multi-seller CP conduits are sponsored and administered by large commercial banks, and the sellers are, more often than not, existing customers of such banks. Bank sponsors organize and administer such conduits but do not own equity interests in them. A multi-seller CP conduit offers bank customers a variety of advantages including low-cost funding, an alternative to conventional bank financing for borrowers that do not have access to the public or private capital markets, confidentiality, structuring flexibility, and relatively easy negotiations and limited rating-agency review compared to private placements or public offerings.