Managing Facilities in Deal Management

This chapter provides an overview of commercial paper and line-of-credit facilities and discusses how to:

Establish line-of-credit and commercial paper facilities.
Create line-of-credit and commercial paper reports.
Monitor facilities for deals.

Understanding Commercial Paper and Line of Credit Facilities

Commercial paper is an important source of external funding for corporate borrowers and has become increasingly popular over the years.

The line of credit is the most common type of facility that is used in managing corporate liquidity. The types of lines of credit that are supported are:

Revolving or non-revolving.

A revolving line of credit, or revolver, allows the borrower to borrow and repay as long as an available balance remains in the line of credit. This means that the amount that is available to borrow against constantly changes as the borrower repays or takes out a loan against the line. A non-revolving line of credit decreases each time the borrower borrows money against it.
Committed or not committed.

In a committed line of credit, the counterparty is committed to grant the borrower's request for loans. This usually requires the borrower to pay a commitment fee.

For a line of credit, the system can accommodate midperiod paydowns on loans that are based on a 30/360 day count basis. For the monthly period in which the paydown occurs, the system calculates the number of days up to the payment date as the actual number of days. The system calculates the remaining days in the monthly period by subtracting the actual number of days from thirty. For example, if the paydown occurs on January 17th, the actual number of days that the system uses to calculate the interest for January is 16 days. The remaining days for calculating interest on the balance from the 17th to the end of January is 30–16 or 14 days.

Once a commercial paper facility or line of credit facility has been created, use the deal capture process for interest-rate physical instruments to create a deal transaction on the facility.

To define a commercial paper or line of credit facility, access the Debt Facilities page and enter the facility type to use. (The fields and available links change depending on the facility type that you select.)

See Also

Capturing Deals and Trade Tickets

Prerequisites

To create a commercial paper facility, the user must set up the following information:

Credit ratings debt ratings

Although PeopleSoft delivers a populated credit rating table with standard rating definitions from Moody’s, Standard & Poors, and Fitch, you may want to add additional rating definitions that are specific for your environment using the Credit Rating component (CREDIT_RTG_TBL). In addition to maintaining standard rating definitions, you must record the credit ratings that are assigned to your commercial paper program or to other debt that you may issue using the Debt Rating Maintenance component.
Issuing agents and paying agents

Issuing and paying agents must be set up through the Treasury Counterparties component. The issuing agent is an agent for the issuer of commercial paper and provides issuing instructions to the Depository Trust and Clearing Corporation (DTC). The paying agent is also an agent for the issuer of commercial paper and is authorized to make principal and interest payments. Both issuing agents and paying agents must be members of the DTC and are typically the same firm. All of the issuing and paying agents in the commercial paper market are commercial banks.
Dealers

Dealers are security firms whose principal role is to intermediate the process of identifying commercial paper investors. Commercial paper issuances are delivered by the DTC to dealer accounts at the DTC and the dealers then deliver the securities to a custodian’s account on behalf of the investor.
Contacts

You enter contacts for commercial paper facilities and line-of-credit facilities are entered using the Contacts component. You can then assign these contacts to a facility on the Facility Contacts page.

Establishing Line of Credit and Commercial Paper Facilities

To establish line of credit and commercial paper facilities, use the Debt Facilities component (TR_DEBT_FACILITY_GBL).

To maintain debt ratings, use the Debt Ratings Maintenance component (TR_DEBTISSUE_RATNG_GBL).

The fields on the Debt Facilities page change depending on the facility type.

This section discusses how to:

Establish a line of credit facility.
Establish a commercial paper facility.

Pages Used to Establish Line of Credit and Commercial Paper Facilities

Page Name	Object Name	Navigation	Usage
Facilities for Issuing Debt	TR_DEBT_FACILITY	Deal Management, Administer Deals, Facilities for Issuing Debt	Establish a new line of credit or commercial paper facility.
Contact Information	FCLTY_CONTACT_SEC	Click the Contact Information link on the Debt Facilities page.	Enter contact information for the facility.
Facility Activity Information	FCLTY_LOC_ACT_SEC	Click the Facility Activity link on the Debt Facilities page.	View a summary of line-of-credit activity.
Fees	FEE_GENERATOR	Click the Fees link on the Debt Facilities page.	Record actual fees that are incurred on behalf of the line-of-credit facility.
Line of Credit	RUN_TRC4120	Deal Management, Reports, Line of Credit	Review all lines of credit and associated usage and costs, and create a report.
Debt Ratings Maintenance	TRX_DEBT_RATINGS	Deal Management, Administer Deals, Debt Ratings Maintenance	Record Credit Ratings on Enterprise as rated by external Rating Agencies. The Ratings are normally divided into short and long term ratings.
Commercial Paper	RUN_TRC4130	Deal Management, Reports, Commercial Paper	Create a report detailing the all-in costs of issuing commercial paper, including fees on lines of credit, as well as dealer fees that are not recorded as part of the commercial paper instrument.

Establishing a Line of Credit Facility

Access the Facilities for Issuing Debt page for a line of credit facility.

Facility Amount

Enter the original amount of the facility.

Amount Available

Displays the remaining value of the facility. If the Revolving Facility field is selected, then the system calculates this value by subtracting the remaining principal for line-of-credit deals for this facility ID and facility type from the facility amount. If the Revolving Facility field is not selected, then the system calculates this value by subtracting all of the deal transaction amounts that have been issued on the facility from the facility amount.

Contact Information

Displays the Facilities Contact page.

Facility Activity

Displays the Summary of Facility Activity page, which provides a summary of borrowings and payments as well as an overall estimated cost of borrowings for the respective facilities.

Line of Credit Attributes

Minimum Draw	Enter the minimum amount that is required for each borrowing transaction on this facility.
Committed Facility	Select to indicate that the counterparty is committed to grant the request for loans. The line cannot be unilaterally withdrawn under circumstances that are not stipulated in the Line of Credit agreement. If the Commitment Fee Terms region has been completed, you must select this field
Revolving Facility	Select to indicate that the borrower can continue to borrow against and repay this line of credit. This type of line-of-credit facility is commonly referred to as a revolver. Note. This option is available only if the Committed Facility check box is selected.
Convertible Facility	Select to indicate that this line of credit is convertible to a term loan. Note. If the Commercial Paper Backup Line field is selected, you cannot select the Convertible Facility check box.
Commercial Paper Backup Line	Select to indicate that this line of credit is an assurance of available funds protecting a commercial paper investor from any payment defaults. This type of line cannot be borrowed against for general purposes. A line of credit may be tied to multiple commercial paper facilities.

Commitment Fee Terms

Commitment Rate

Enter the percentage rate to use for calculating the commitment costs that are tied to the line of credit. This is typically entered as a decimal of 1% such as .25 (¼ of 1%). The system uses this in calculating the estimated commitment costs on the Line of Credit Activity report.

Payment Cycle

Select the interval between commitment fee payments. The options are:

Annual
Daily 28
Daily 35
Daily 49
Maturity
Month
Quarter
SemiAnnual
Weekly

Unused Portion of Facility, Full Facility, or No Commitment Fee

Select the correct option for calculating the commitment fee for this facility. Select Unused Portion of Facilityto indicate that the commitment rate is applied to the unused portion of the line of credit, rather than to the entire facility amount.

Note. If the Commitment Fee Terms region has been completed, then you cannot select the Committed Facility check box.

See Also

Managing Facilities

Establishing a Commercial Paper Facility

Access the Facilities for Issuing Debt page for a commercial paper facility.

Issuing Agent

Enter the agent for the issuer of the commercial paper that provides issuing instructions to the DTC. This is usually the receive into counterparty.

Paying Agent

Enter the agent for the issuer of the commercial paper that is authorized to make principal and interest payments. This is usually the pay into counterparty.

Facility Amount

The original amount of the facility.

Amount Available

Displays the remaining value of the facility.

Rating Agency

Select the agency that has rated this commercial paper facility. The credit rating agencies to be selected and their rating values are set up through the Debt Ratings Maintenance component.

Commercial Paper Dealers

Dealer	Select the security firm whose principal role is to intermediate the process of identifying commercial paper investors. Not all commercial paper issuers use dealers, and commercial paper could be issued without a dealer even if a dealer is not listed on the facility.
Minimum Denomination	Enter the minimum amount that is required by this dealer. If the minimum denomination that you enter is greater than the par amount of the deal, the system issues a warning but allows the deal to be booked.
Dealer Cost	Enter the cost that is associated with this dealer. This is typically entered as a decimal of 1% such as .25 (¼ of 1%). The system uses this in calculating the dealer's cost on the Commercial Paper Activity report.

See Also

Managing Facilities

Creating Line-of-Credit and Commercial Paper Reports

The Line of Credit reports shows all lines of credit and the associated costs.

The Commercial Paper report enables you to determine the all-in costs of issuing commercial paper debt. This report is organized by facility, and you can print any or all of the commercial paper facilities. Information on the report includes facility information, commercial paper issued, the interest rate, prorated dealer costs, prorated line-of-credit costs, and the effective annual rate for each commercial paper deal. The effective annual rates are expressed using this formula:

Monitoring Facilities for Deals

If you have associated facilities with deals, run the Monitor Expiring Facilities process (TR_FCLTY_RVW) to determine whether your facilities are close to expiring.

See Also

Specifying IRP Deal Details

Monitoring Facilities

Maintaining Deals

Facility Amount	Enter the original amount of the facility.
Amount Available	Displays the remaining value of the facility. If the Revolving Facility field is selected, then the system calculates this value by subtracting the remaining principal for line-of-credit deals for this facility ID and facility type from the facility amount. If the Revolving Facility field is not selected, then the system calculates this value by subtracting all of the deal transaction amounts that have been issued on the facility from the facility amount.
Contact Information	Displays the Facilities Contact page.
Facility Activity	Displays the Summary of Facility Activity page, which provides a summary of borrowings and payments as well as an overall estimated cost of borrowings for the respective facilities.

Issuing Agent	Enter the agent for the issuer of the commercial paper that provides issuing instructions to the DTC. This is usually the receive into counterparty.
Paying Agent	Enter the agent for the issuer of the commercial paper that is authorized to make principal and interest payments. This is usually the pay into counterparty.
Facility Amount	The original amount of the facility.
Amount Available	Displays the remaining value of the facility.
Rating Agency	Select the agency that has rated this commercial paper facility. The credit rating agencies to be selected and their rating values are set up through the Debt Ratings Maintenance component.