PIMCO and State Street to Help Manage Commercial Paper Funding Facility

Posted on 04/07/2020

Pacific Investment Management Company LLC (PIMCO) is managing the activities of Federal Reserve’s Commercial Paper Funding Facility (CPFF). Under this facility, qualifying commercial paper issuers may sell commercial paper to CPFF through participating commercial paper dealers. CP Funding Facility II LLC is the name of the CPFF, which is headed up by the Federal Reserve Bank of New York (FRBNY). PIMCO will serve on a short-term basis as asset investment manager, and State Street Bank and Trust Company will serve on a short-term basis as the custodian and administrator for the CPFF.

Issues for the commercial paper program must be organized under the laws of the United States, any State, the District of Columbia, Puerto Rico, the Virgin Islands, an Indian Nation, or any other possession or territory of the United States that has its own body of corporation law; (b) a U.S. branch of a foreign banking organization; or (c) a U.S. municipal issue.

According to the April 6, 2020, FRBNY press release, “Eligible issuers must register with the Commercial Paper Funding Facility (CPFF) in order to sell commercial paper to the CPFF. To register, eligible issuers must complete the Registration Materials and either email or fax them to PIMCO at CPFFRegistration@pimco.com or 949-720-8622 with attention to CPFF Registration. Eligible issuers must also pay the facility fee by wire transfer as described in the registration form.”

Other Details

The maximum transaction size may not exceed the amount of an issuer’s commercial paper that the SPV may own at any one time. The minimum transaction size accepted over the BLOOMBERG PROFESSIONAL BOOM® platform is US$ 100,000. The SPV will not purchase commercial paper with an extendable maturity or interest-bearing commercial paper. The SPV will not purchase variable rate demand notes (VRDNs) or variable rate demand obligations (VRDOs). The CPFF could have municipal commercial paper issuers participate.

SPV Life

The SPV will begin purchasing commercial paper when the CPFF opens, and is scheduled to cease purchasing commercial paper on March 17, 2021, unless the Board extends the facility. The New York Fed will continue to fund the SPV after such date until the SPV’s underlying assets mature. The SPV will be funded by loans provided by the FRBNY at the rate of interest on excess reserves. All credit extended to the SPV will be with full recourse to the SPV and secured by all the assets of the SPV, including the U.S. Department of the Treasury’s US$ 10 billion equity investment from the U.S. Exchange Stabilization Fund in the SPV.

The Federal Reserve did not specify a maximum size for CPFF. Commercial paper can be sold to the SPV at any time while the CPFF remains open, subject to applicable limits.

Keywords: Allianz SE, State Street Corporation, Federal Reserve System.

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