Commercial paper and euro-commercial paper

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Commercial paper and euro-commercial paper
  • What is commercial paper?
  • Who issues CP?
  • CP markets
  • Why issue CP?
  • Lower cost of borrowing
  • Flexibility
  • Backstop facilities
  • CP and ECP programmes
  • Parties involved in a CP programme
  • More...

Commercial paper and euro-commercial paper

What is commercial paper?

Commercial paper (CP) is a type of debt security which is traded by professional and institutional investors in the money markets (a money market instrument) and is:

  1. issued to meet short-term funding needs, for periods of between one week and 364 days

  2. issued in bearer global form (see Practice Note: Global securities v definitive securities)

  3. unsecured, unless it is issued under an asset-backed commercial paper programme (see Practice Note: Asset-backed commercial paper and associated structures)

  4. sometimes (but not usually) listed on a stock exchange

  5. can be awarded a credit rating from one or more credit rating agencies

  6. usually issued at a discount to its face value, rather than being interest-bearing—this means that the return to the investor is equal to the difference between

    1. the discounted amount at which the CP is purchased, say 97% of its face value, and

    2. the amount payable on redemption of the CP, 100% of its face value, and

  7. issued under a programme

If the proceeds of issue of CP are received in an account in the UK, there may be a breach of the restrictions on accepting deposits under section 19 of Financial Services and Markets Act 2000 unless the CP is issued to professional or institutional investors and the redemption value of the CP is at least £100,000. For more information on

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