Structured investment vehicle definition

View the related practice notes about Structured investment vehicle

Asset-backed commercial paper structures

What is asset-backed commercial paper?Commercial paper (CP) is a short-term debt security (see Practice Note: Commercial paper and euro-commercial paper).Where CP is generally only issued by highly-rated corporate entities or by finance vehicles, asset-backed commercial paper (ABCP) can be issued by companies with a wide range of credit ratings. This is because it is secured by underlying assets, usually receivables that produce regular cashflows. These assets are what the investors focus on—not the issuer.A variety of receivables can be used, for example:•credit card debts•residential mortgages•commercial loans•trade receivablesAs with CP, it is typically issued through a programme.Regulation (EU) 2017/2402 (the EU Securitisation Regulation), and Assimilated Regulation (EU) 2017/2402 (the UK Securitisation Regulation), set out criteria for non-ABCP and ABCP simple, transparent and standardised (STS) securitisations (see Practice Note: UK Securitisation Regulation—essentials [Archived]). The UK government is carrying out a major reform of the UK securitisation regime—for information, see UK Securitisation Regulation—essentials [Archived]—Reform of the UK securitisation regime.Why use ABCP?The reasons for issuing ABCP are similar to those which motivate securitisation issuance....