So far, it doesn't appear that asset-backed commercial paper investors will be directly impacted by the financial discrepancies involving WorldCom - at least not technically. The news of WorldCom's $3 billion-plus accounting mishap, however, sent headline ripples through all debt markets with exposure to the scandalous telecom, according to published reports.

ASR is hearing that the bank administrators and/or liquidity providers for WorldCom's trade receivables facilities were separately purchasing the entire $1.5 billion in WorldCom tainted receivables out of their conduits. In fact, by the end of last week, it was anticipated that WorldCom would be completely out of the market.

"The ABCP conduit market really doesn't have the flexibility to work on a complicated workout situation, which is probably what this will turn into," a source told ASR last week. "It should become a liquidity bank issue as opposed as to an investor issue."

However, anticipating a fallout of some sort, WorldCom's trade receivables facilities were downsized and restructured with additional triggers and structural mechanisms in May. The more conservative enhancements had the effect of lowering advance rates for the liquidity providers. The dollar value of WorldCom's conduit exposures, originally at about $2.2 billion, was reduced to $1.5 billion as part of the restructuring.

According to filings with the Securities & Exchange Commission following the restructuring, WorldCom had trade receivables facilities with eight ABCP conduits: Bank One's Falcon Asset Management Corp. and Jupiter Securitization Corp.; West LB's Paradigm Funding; Bayerische Landesbank's Giro Balanced Funding Corp.; Bank of Nova Scotia's Liberty Street Funding; Citibank's Corporate Asset Funding Co. and Charta Corp.; and JPMorgan's Delaware Funding Corp.

"We're not taking any rating action on any of these conduits because of the structural protections in them," said Deborah Siefe, managing director in the ABCP group at Fitch Ratings. Siefe added that, as of yet, the collateral sold into the facilities has not showed signs of deterioration.

Volume stagnant at best

Meanwhile, it appears June's numbers will further the trend of declining ABCP outstandings. Though the popular complaint has been that accounting uncertainty is slowing activity, Moody's Investors Service also noted recently that money market investors have had less cash to throw around.

According to preliminary indications from the Federal Reserve's database, it looks like ABCP outstandings will come in around $710 billion for May, down a hefty $35 billion from the market's volume peak at the close of 2001.

However, Moody's Sam Pilcer is expecting as much as $4 billion in new transactions that should have closed by the end of last week (and were not included in the Fed's most currently available data).

"I'm seeing easily three to four billion in volume that has to be closed by the end of the month, which is more than I anticipated originally," Pilcer said.

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