COLUMBUS, Ohio – After conducting a review of its liquidity position and the ongoing costs to maintain a commercial paper (CP) program, Corporate One has terminated its relationship with ratings agencies, Standard & Poor’s and Moody’s. By ending their CP program, the corporate credit union will save its members more than $260,000 annually – primarily through the cost savings from paying ratings agencies that provided short term credit ratings. Corporate One had been most recently rated by Standard & Poor’s and Moody’s with ratings of Watch Negative/A-1 and P-1 respectively. The program was terminated as of March 5, 2009.
Commercial Paper (CP) is short term unsecured debt issued by companies in the form of promissory notes as an obligation of the issuer. However, it is currently difficult to issue any debt in the capital markets, even for those institutions with the highest credit ratings.
“For many years, Corporate One has used its CP program as a source of additional liquidity for its members; however, current high levels of cash and cash equivalents at the corporate (currently at $1.4 billion), combined with the ability to generate additional liquidity (approximately $2.1 billion) through other tested and available sources, drove the decision to discontinue our CP program,” said Lee Butke, president/CEO of Corporate One. “Credit unions are already being negatively affected by the current economic downturn. Given the unreliability to be able to generate liquidity by issuing CP, it makes sense to save our members from paying for our debt ratings,” he added.
“The market has proven to be very fragmented and not useful during times of crisis,” said Tammy Cantrell, Corporate One’s senior vice president, A/LM. “Some past examples of the CP markets seizing were during the fall of 1998 and September 2001. During those times, CP was not a reliable source of liquidity for our members. Fortunately, we have other sources of liquidity that are priced on an as-needed basis, such as the National Credit Union Administration’s Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP),” she added.
Contact: Paul Hixon, VP of Marketing at 800/282-2560, ext. 9313.