The cessation of the Banker’s Acceptances (BAs) market might open up opportunities for Canadian Asset-Backed CP (ABCP, or CP) to increase its presence to fill an important role in short-term market supply, wrote Fitch Ratings.
ABCPs are short-term notes issued by conduits with maturities of up to one year, often ranging between 30 to 90 days in Canada. These CPs are typically issued at a discount, allowing investors to profit at maturity, and are mostly denominated in Canadian dollars.
ABCP programs can be categorized into two types in Canada: multi-seller conduit and single-seller conduit. The main difference is that multi-seller conduits are established by banks to provide financing alternatives to their clients, who are the sellers into the conduit, whereas the sponsor of single-seller conduit is typically the sole originator of assets, with the conduit used as an alternative funding source for its own business activities.