Asset-Backed Commercial Paper - Explained
What is Asset-Backed Commercial Paper?
Written by J. Mance Gordon
Updated at April 19th, 2024
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What is Asset-Backed Commercial Paper?
An asset-backed commercial paper program refers to a short-term debt offering that is backed by collateral. The paper is generally for $100,000 or more. It is an investment vehicle that is short-term with a maturity period of between 90 and 270 days.
ABCPs are different from commercial paper because they are backed collateral. The interest payment that ABCP investors get comes from the pool of assets used to back the security, such as car loans. Upon maturity of the collateralized papers, investors are given a principal payment generated from collections of the asset credit, new ABCP issuance, or liquidity facility of credit.