If any fixed-income product faced an ultimate test of its operations during the last two weeks, asset-backed commercial paper (ABCP) would be high on the list. On any given day there is bound to be hundreds of millions of dollars of ABCP maturing, which needs to either be rolled or have new paper issued to pay off the maturing paper, and Tuesday September 11th was no exception.
Dealers, issuing and paying agents, and DTC play a large role making certain that process goes smoothly, but unfortunately the majority of these players were evacuated and locked out of their offices in New York's downtown business district after Tuesday's terror attack.
Despite some rumors ASR heard that a handful of isolated incidents of ABCP liquidity lines were drawn to assist in paying maturing ABCP, "the market passed this critical test," according to Amy Fahey, head of conduit management at Banc One, one of the largest ABCP players in the world.
While A-1+/P1 ABCP paper saw a premium early during the week of the terror attack, as did all credit products, that premium lessened later in the week and nothing too dramatic is seen now, commented Fahey. Adding that she was impressed how the market banded together to get things done and the bank's ABCP dealers - Goldman, Lehman, Merrill, Morgan Stanley, and CSFB - were all in contact with Banc One by Tuesday afternoon and operational off-site by Thursday September 13th.
One challenge seen during that traumatic week was that although investors knew that they had money to invest they were struggling to get good numbers on how much they had to put to work. Systems to handle ABCP transactions at Bank of New York and Bankers Trust were also affected. Nevertheless, Banc One was able to successfully roll all of its ABCP on time, said Fahey. Banc One benefits from its Chicago locale and that the bank acts as its own Issuing and Paying Agent for its ABCP programs as well BOCM as dealer. /IFR Asset-Backed Securities