Relationship pundits say an indispensable element to any successful connection is communication. In the world of structured finance, where the stakes are higher, a solid liquidity backstop is emerging as the key to a successful relationship between CDOs and the asset-backed commercial paper conduits that fund them.

True enough, a reliable liquidity facility must be in place for any ABCP to sustain attractive returns over time. The need is more pressing these days, as risk-based capital standards under Basel II implementation looms in Europe and is still being hashed out in the U.S. As such, banks and conduit managers alike are on the hunt for the best ideas in designing reliable liquidity schemes, especially for programs that fund CDOs.

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