本周有1200亿ABCP要续期，银行的大麻烦

henry

In Tight Market,
Banks Woo Buyers
For Commercial Paper
By CARRICK MOLLENKAMP
September 10, 2007; Page C1

LONDON -- It is crunch time for many of the world's biggest banks grappling with one of the tightest credit markets of recent memory.

About $120 billion of commercial paper outside the U.S. is due for renewal in the next week, including $56.5 billion of asset-backed paper, which has met the stiffest resistance from investors. Issuers need to find buyers in order to roll over these short-term funding mechanisms or pay off the loans. So banks and other issuers are pulling out all stops to lure investors back. In the meantime, they are using short-term moves to raise cash to keep them going.

While there is little sign the market is opening up, a few rays of hope are emerging. In Australia, the central bank has broadened the definition of assets it would accept as collateral for short-term funding it supplies to domestic banks. In the U.S., money-market funds haven't suffered big redemptions and thus still have money to put to work. Investors in these funds also are willing to hold commercial paper for slightly longer time frames, suggesting some stability may be returning, though the funds may find their investors want a limited diet of short-term paper.

It is a crucial time. Volume in this market tends to ramp up midmonth, and September is shaping up to be a busy time. In mid-August, $100 billion in euro commercial paper matured, according to Lehman Brothers Holdings Inc. and research firm Dealogic.

Adding to the challenge, commercial-paper sellers increasingly are turning to shorter maturities, adding to the amount of debt to be rolled over on a daily or weekly basis and to the frequency of issuers returning to the market.

Commercial paper is a $3 trillion market of loans issued to raise money for short periods of time. Asset-backed commercial paper is a large and growing segment of this market, used by banks, hedge funds and other financial institutions to raise money to fund various investments. Billions of dollars of these asset-backed loans have been tainted because some proceeds were used to buy investments tied to U.S. subprime mortgages.

Because of limited investor demand, the U.S. and euro commercial-paper markets have been shrinking in terms of outstanding debt. The asset-backed commercial-paper market shrank by $195 billion from July to $980 billion at the end of August, according to Federal Reserve data.

Here is how commercial-paper issuers are stepping up efforts to woo money-market investors or find other funding:

Bank affiliates, known as conduits and structured investment vehicles, as well as independent paper issuers managed by money managers are seeking to calm investor unease by disclosing an unusual level of information about their holdings, especially their exposure to subprime loan assets.

Structured investment vehicles, known as SIVs, are in talks with banks to borrow against their own assets to obtain funding pacts known as repurchase agreements. These so-called repo pacts could help pay maturing paper and avoid fire sales of their assets, which include securities tied to U.S. mortgage loans. Many commercial-paper sellers also have been reducing their issuance and choosing to sell assets to raise money.

Sellers that are coming to market are paying higher yields -- in the range of 0.5 percentage point more than the London interbank offered rate. That in turn is helping drive up interest rates broadly, as Libor is benchmark for many other kinds of short-term lending.

In Europe, bankers recently met with the European Central Bank to discuss the possibility of more cash injections into the financial system.

Banks that may be forced to assume assets from the conduits that have financing coming due could themselves face shortages of capital.

To head off such a problem, Australia's central bank, the Reserve Bank of Australia, has relaxed rules on collateral it will accept for short-term funding. This would enable banks to take more time to evaluate which portions of the asset-backed commercial-paper market are most affected by ailing subprime mortgages.

In doing so the Australians went beyond the Federal Reserve, which doesn't accept such paper as collateral in repo operations but did recently clarify it was willing to accept a wide variety of such paper for its lesser-used, and costlier, "discount window" loans to banks.

The Reserve Bank of Australia changes will begin Sept. 17 and in October will include residential mortgage-backed securities and Australian dollar-denominated asset-backed commercial paper. Bond yields fell sharply on the news.

London is a global hub for trading the bulk of the $800 billion euro commercial-paper market for 68 countries outside the U.S. "There is so much paper out there," said Neil Hamilton, a lawyer with London law firm Clifford Chance, which hosted a debt conference in London Thursday and Friday.

One big concern is SIVs set up by banks and other money managers. These affiliates deal heavily in commercial paper, but their operations often are counted off bank balance sheets. If they can't sell commercial paper to pay off securities coming due, many may be forced to sell assets to finance their operations.

"It's going to be difficult for SIVs, especially the nonbank-sponsored SIVs," said Manfred Exenberger, a managing director at Omicron Investment Management in Vienna. Banks "will have to take the assets on balance sheet."

Over the next two weeks, trade groups for the securitization industry plan meetings and conference calls to discuss how to respond to the shutdown of certain parts of the debt markets.

In the end, investors may not wade back into the market until October and November, when big banks such as Citigroup Inc., Deutsche Bank AG, and Barclays PLC, all major players in the debt markets, report financial results and provide even more details about their subprime exposure and what is actually on their balance sheets.