Asset-backed commercial paper (ABCP)

A form of commercial paper ( www.practicallaw.com/1-500-2569) that is secured by the future cash flows from a wide variety of financial assets. Known as "receivables ( www.practicallaw.com/3-107-7110) ", such assets may include trade and credit card receivables, equipment and consumer loans, ABS ( www.practicallaw.com/7-385-1838) , MBS ( www.practicallaw.com/3-385-1859) and corporate bonds ( www.practicallaw.com/0-107-6503) . Receivables are acquired by the ABCP issuer using the sale proceeds arising under the ABCP issuance programme.

ABCP securities mature no later than 180 days after issue and are used for meeting the short-term financing needs of the entity that established the ABCP programme.

ABCP issuers (referred to as a "conduits") are typically established by a bank or other credit institution (also known as a "sponsor") in the form of bankruptcy-remote special purpose vehicles (SPVs) ( www.practicallaw.com/4-107-7534) or structured investment vehicles (SIVs) ( www.practicallaw.com/1-380-3911) . This structure allows the issuer and its assets to be legally separated from the sponsoring bank or credit institution, insulating the issuer from (among other things) the insolvency of the sponsor.

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