Last December, Julie Nickoley, senior manager of
commercial paper operations at DaimlerChrysler, agreed to work with Prescient
Markets to develop a Web-based subscription technology service to help companies
price and manage their commercial paper issuance. The goal: a system to provide
real-time flow of short-term prices and a way to track investors and competing
issuers. At the time, the global automaker and long-time direct CP issuer saw
the possibilities as interesting, but not necessarily a priority.
All that changed two months later, when
DaimlerChrysler's CP was downgraded to A2/P2. Suddenly, big money-market funds,
which once constituted 85% of DaimlerChrysler's market, were no longer buyers.
Nickoley had an immediate need to figure out what other buyers existed out in
the market to take their place, but it took her a day or two to get investor
information out of the mainframe-based system she used to manage CP issuance.
In October, the kind of capability Nickoley sought finally became available with
the introduction of Prescient Funding Desk. Now we know for all customers
what time of day they trade, what size of trade they normally do, if they come
in through cpmarket or on the phone, says Nickoley. The customer analytics
was the key.
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With the development of Funding Desk, companies can get information on prices,
including fluctuations in competitors? CP rates and what investors are looking
for in the market on a real-time basis. Funding Desk's pricing module provides
short-term market rates from Prebon Yamane and CP rates from cpmarket.com,
Prescient?s online platform for direct issuance of CP.
In Tune with Market
The advantages? Trades done on cpmarket.com flow automatically into Funding
Desk, and Prescient says it is working on a link with Bloomberg that will bring
in data on trades done on Bloomberg's CP platform. Companies can save on funding
costs by using the data to target less yield-sensitive investors. They can also
save money by knowing when competitors move rates and then matching those moves.
Using Funding Desk, we're much more in tune to whether pricing is changing
in the market, DaimlerChrysler's Nickoley says. Besides cost savings,
issuers may simply want to keep tabs on their investors to ensure that no one
investor holds too large a chunk, in order to lessen the risk of having to
scramble to find other buyers if a big investor exits suddenly.
Targeting New Issuers
Laurent Paulhac, Prescient's president, won't give the price of Funding Desk,
but says it varies based on the size of a corporation's CP program. So far only
DaimlerChrysler and ChevronTexaco are using Funding Desk. Paulhac defines the
market for Funding Desk as the 500 U.S. companies with more than $1 billion of
CP outstanding. About 40 of those companies now sell some or all of their
CP directly. But given the ease of electronic issuance and the support available
on Funding Desk, Paulhac expects more companies will move toward direct issuance
via the Web. In fact, officials at both Prescient and Bloomberg say they were
already seeing more interest in their platforms for direct issuance from
companies that traditionally placed their CP through dealers even before Funding
Desk's debut.
If those companies are going to sell paper directly, they're going to need
something on the funding desk or treasury operations side to account and process
and transact, says Craig Dukes, North American manager for short-term funding at
Ford Motor Credit. Funding Desk is a perfect fit for those people.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
