When global CP programmes appeared in the market they were heralded as the best way of accessing short-term investors from all around the world. Their advocates claimed they were simple, cheaper than signing multiple programmes and could be used to raise funds quickly on a truly global scale. But 12 years have passed since the first signing and the market has yet to live up to the hype. Global programmes allow issuers to access investors under one document that would normally only be accessible under both Euro-CP and US CP platforms. Stephanie Sfakianos, head of Euro-CP origination at Deutsche Bank, says: "It's not as high-tech as it sounds. It's a low-tech way of combining the two markets, and I don't see why anyone who wanted access to both sets of investors wouldn't consider it." But there are only 29 global CP programmes in the market, and 13 of these have no outstanding trades. Susan Hindle, money market origination group at Goldman Sachs, says: "There are few dealers who are prominent in both the US and Euro-CP markets. Issuers really need someone who can make objective commentary on both these sectors if they're going to optimize a global programme." Global CP was created partly because some banks wanted to move into a different market. But borrowers also gain, and new signings reached a peak last year with nine issuers opting for global CP. However, only five global programmes have been signed in 2000. Nestle signed its global CP programme in October 1999. It replaces four separate programmes in the US, Euro, French and sterling markets. Stephane Alby, deputy treasurer at Nestle, says: "Generally the global programme is very easy to manage. It's not a small programme - it's like three facilities in one legal envelope - but it works fine even though we've just one person doing most of the transactions." Nestle has issued just three notes off its global programme, according to CPWare, worth $14.64 million. However, other issuers have been making much greater use of their global facility. European Investment Bank (EIB) has $2.25 billion outstanding off its programme and, although it still has a live US CP facility, the issuer favours the global programme. Joseph Vogten, head of division, capital markets, at EIB, says: "It's about streamlining and economies of scale. It is by no means a sign of dissatisfaction with the separate programmes. If a global programme fits all your needs then it makes no sense to have fragmented programmes." This is the consensus among most dealers and issuers. But a global programme is not always appropriate if an issuer already has one programme signed. This may be why the number of signings this year has dropped. But Sfakianos, at Deutsche Bank, says: "I don't think interest in global programmes is petering out. But if an issuer already has a Euro- or US CP then there's less benefit in doing a global." This is because global programmes are only cheaper if you have not already paid to access one of the markets. Nationwide Building Society (Nationwide) has a Euro-CP and a US CP in the market, and signed them at different times. Andy Hutchinson, senior dealer at Nationwide, says: "The only real benefit in doing a global programme is the cost of setting up the facility. You only have one arranger, one document and one lawyer to consider." But Giles Chapman, head of sales at Citibank, thinks global programmes offer more than an inexpensive start. He says: "Once the global facility is up and running there's one major practical advantage. That is being able to source funds in either market depending on which is cheapest on any given day. This allows borrowers to move funding easily from one market to the other without the need for two large programmes with back-up lines for each." But there are signs that the global CP market splits issuers with regards to strategy. Nestle had programmes under three different issuer names before it signed its global facility. Alby, at Nestle, says: "The global CP programme means we now have a single pricing in the market for the Nestle name. There is one team working out of Switzerland and it makes it all much simpler." But Hutchinson, at Nationwide, has reasons for avoiding the global market. He says: "The beauty of a stand-alone US CP programme is that it should prohibit the selling of your paper back into the UK. Nationwide is a very active CD issuer in the UK, but CP tends to attract a higher yield. This means investors may go for the more expensive paper if it suddenly arrives on the scene." Goldman Sachs, who will be arranging two more global shelves before the end of the year, claims it can tailor its global facilities to the issuer's needs. Hindle, at the bank, says: "We can offer issuers certain clauses within the global CP format which, for example, allow non-dollar denominated US CP to be issued. The EIB programme has this facility and has used it to issue US CP in euro." But many think the hype surrounding the global facility is too emphatic. Vogten, at EIB, says: "Sometimes the labels for these new formats are chosen a little bit ahead of time. When we see euro and yen join dollar in the global marketplace more issuers will sign and liquidity will improve. Three currencies being bought and sold worldwide, not just one, is needed for a market to be truly global. Then global programmes will come to the fore."
September 22, 2000
