Commercial paper

A commercial paper , one one day duration at one year, is a Crédit between firms, i.e. the Entreprise S (generally largest) which is in phase of need for Trésorerie, will issue to they-even commercial papers which will be bought by other companies having facilities of treasury.

The companies cannot issue commercial papers easily, they must satisfy very precise conditions of financial Notation established by independent organisms (the companies must draw up notes of management over the last six months to justify of their financial health and their solvency).

The France is with the third world rank on the market of the treasuries - in the forefront in the European Union.

The growth of the commercial papers coincïcidé with the passage to the Euro, and the wave of fusion-acquisitions, which created important financing needs.

The duration of the tickets is increasingly short: tickets with very short term (25% currently of one to ten days)

The remuneration of these tickets is very interesting, near to the rates of the Money market. The market is very concentrated, with 20 companies in France (LVMH Moët Hennessy Louis Vuitton, Vivendi, France Telecom…) transmitting and of the investors: other large companies and finance companies (banks) and OPCVM (organization of placement in transferable securities).

The Commercial papers (BT) are negotiable evidences of indebtedness (nominal burnup) emitted by the companies (French or foreign) having access to the money market. From one duration going of 1 day with 1 year, of a minimal amount of 150000 euros, BT can be emitted atfixed rate or to have a coupon indexed on a variable reference (generally the EONIA). When it is emitted atrate fixes the interests can be paid at the end (postcomptés) or paid in advance (IPA).

The financial notation of the program by an credit rating agency (S&P, Moody' S, Fitch) is not obligatory if the transmitter is side on a European place (either with the purse or possibly if there exist obligations with dimensions of this same transmitter). In practice rare are the companies having a program of BT not noted because more and more of investors refuse to buy BT not noted.

In practice the market is particularly active on maturities lower than three months. The rates of loans are particularly cheap for the companies (less low than for credit lines). They are in general higher of some basic points (or basis not, 1bp=0.01%) than of the same the Eonia swap maturity. The variation with the swap called also spread of emission depends on several factors: The quality of credit of the transmitter (the spread increases with the risk) Duration of emission (the spread increases with the duration) More or less great liquidity of the market (the spread increases when the liquidity decreases) Incur emitted by the transmitter (more one transmitter calls upon the market more it is likely to pay expensive)

The French market of BT, created in 1985 with like model the American USCP, knew a significant progression as well in volume as of many transmitters. If it were initially to allow the companies having a surplus treasury to place their cash while buying BT emitted by companies having short-term financing needs, largest of the purchases (approximately 70%) is realized today by the monetary funds (SICAV, CPF) like by the insurance companies. It is besides this layer of investors (50% of the European funds monetary are managed in France) which contibué with the success of this market.

Today it is almost completely intermédié by the banks and to a lesser extent by the brokers. The banks play the part of agent placer (dealers) but have compared to the brokers the advantage of being able to make " catch ferme" , i.e. to buy BT without having of investor declared at the time of the negotiation. They can then keep part of BT bought in the event of nonresale, one says whereas they " portent" paper in their " books" and are thus in credit risk on the transmitter of the credit. All the active large banks on this market have a book BT (more generally of nominal burnup what includes the Certificates of deposits but also the Euros commercial papers or US commercial the papers). The size of this one varies according to the establishments and can go up to 4 billion euros.

See too

Certificate of deposit Finance of company

Random links: