Commercial papers
General Information
Commercial Paper is short term debt (<365 days) in the form of negotiable, bearer promissory notes issued for set maturities, at discount in the Euro market through sole or selected dealership, with no directly related underwriting commitment.
A Commercial Paper programme enables an issuer, with a bank acting as the intermediary, to continually issue debt instruments with money market maturities. Interest is usually calculated on a discount basis. This means that the investor pays the principal less the interest, the so-called ‘discount price’. As the commercial paper reaches maturity, the initial amount will accrue to the principal (nominal amount).
The issuer’s credit rating is an essential requirement to become a professional borrower in the Euro commercial paper market and plays a key role in determining the pricing. The company’s country of origin and business may also influence it.
In the European Monetary Union, most commercial paper programmes tend to be international. However, certain European domestic programmes remain attractive due to differences in their countries’ legal and tax environments.