The Federal Reserve announced on October 7, 2008, that it is creating the Commercial Paper Funding Facility (“CPFF”) as a special purpose vehicle (“SPV”) to buy three-month U.S. dollardenominated commercial paper at a spread over the three-month overnight index swap (“OIS”) rate from eligible issuers. CPFF will be available to all domestic issuers (and U.S. issuers with foreign parents).of commercial paper, including non-financial institutions as well as banks.
Commercial paper (including asset-backed commercial paper “ABCP”) purchased by CPFF must be rated at least A1/P1/F1 by a major Nationally Recognized Statistical Rating Organization (“NSRO”), and not rated below A1/P1/F1 by any major NSRO. Commercial paper that is not ABCP must be secured to the satisfaction of the Federal Reserve by an upfront fee, a guarantee, or other satisfactory collateral arrangements.
The maximum limit of commercial paper a single issuer may sell to CPFF will be the average amount of commercial paper the issuer had outstanding in the month of August 2008, less any amount of the issuer's outstanding commercial paper held by investors other than CPFF.
CPFF will cease purchasing commercial paper on April 30, 2009, unless the Federal Reserve agrees to extend the facility.
The Federal Reserve has indicated it will consult with market participants regarding appropriate spreads and other methods for issuers of non-ABCP commercial paper to provide satisfactory security to the Federal Reserve.
The launch date for CPFF has not yet been set.