CP FOR FLEXIBLE FUNDING
12
info exchange
What's NewS Issue 8 August 1996
INTERNATIONAL ACCESS
As one of the best-selling retail names \nM
Europe, Rabobank is often invited to be^
one of the first bank issuers in given
maturities desired by investors at any
particular time. 'Once we or our lead
managers have spotted the demand for a
particular currency, size, coupon,
structure, or maturity, we are often one of
the first to make use of this funding
window. The result,' says Dijkstra, 'is that
we have excellent access to international
capital. If we suddenly need to fund an
acquisition, we'd have no problem
borrowing as much as NLG 1 billion on
short notice in a single shot.'
ranging from Guilders to Hong
Kong Dollars to South African
Rand.
INVESTOR INSIGHT
What's more, the
international capital markets
operation has made global
investor relations a top
priority. Much effort is
expended on road shows and
otherwise to insure investors
have a clear insight into
Rabobank's overall strategy
and an opportunity to ask
Haijo Dijkstra - Rabobank is now a preferred name important questions.
'The aim is to build a positive
sources by widening its presence on the recognition of who and what we are,' says
international debt markets and by issuing Dijkstra. 'We have become a preferred
in a number of different currencies name and want to keep it that way.'
Rabobank's diversifying commercial paper program is oriented towards
meeting the increasingly sophisticated demands of its large clients and towards
meeting its own short-term funding requirements. It is also proving especially
useful for fast-growing branches in the international network.
Commercial paper is essentially short-term
debt issued by Rabobank or arranged for
other borrowers who need to raise cash. It
is aimed at four main kinds of money
market investors: other banks, corporate
clients, institutional investors, and central
banks. The primary attraction of
commercial paper for the investor lies in
its exceptional liquidity. Although it
carries interest rates almost comparable to
money market paper, it does not have the
disadvantage of locking its holders into
the full period of a fixed-term instrument.
Because there is an active secondary
market for CP - (managed by big brokers
such as Citibank, SBC Warburg, and UBS
Securities) - investors can rapidly access
their underlying liquidity by selling the
instrument at any time.
ADDED APPEAL
It is the corporate clients and banks who
tend to most fully appreciate the flexibility
under which they can quickly issue or
dispose of commercial paper and thus take
advantage of attractive alternative
investment opportunities. For banks there
is the added appeal that commercial paper
can be used as collateral for credit
facilities with the central bank. Moreover,
when they are buyers of commercial
paper, such instruments are hooked on the
asset side of the balance sheet for only as
long as they are actually held; fixed-period
deposits, in contrast, require that cash be
tied up for the same fixed period to meet
solvency requirements.
CENTRAL-BANK HOLDINGS
'Indeed, as more stringent BIS and other
solvency requirements come into play,
such instruments will play an increasingly
important role,' says Rob Mayenburg,
who manages CP activities in Utrecht.
Central banks also buy the paper, which is
available in multiple currencies, as a way
to manage and invest their currency
reserves. Although their main instrument
for this purpose is other government
treasury bills, 'I wouldn't be at all
surprised to learn that many central banks
were holding Rabobank-issued
commercial paper,' remarks Mayenburg.
INTERNATIONAL NETWORK TOOL
Finally, institutional investors tend to buy
and hold commercial paper as an
alternative investment instrument in which
to take a view on interest rate or currency
movements. Thus, commercial paper acts
as a sometimes useful supplement to their
more traditional holdings in bonds and
equities. Rabobank's foreign branches are
finding commercial paper to be an
especially useful instrument as they try to
keep pace with their headlong growth.
Australia, for example, has successfully
launched several multicurency tranches of
Rabobank-guaranteed commercial paper
under an authorization ceiling soon to be
increased to AUDI billion. Ireland is
expected to follow soon.
UNISONO - continued from page 3
BANK RELATIONS
The company's growing complement of
principals, such as Stork, Genencor and
DAF, and its strengthening position on the
Chinese market means it is a highly
desirable target cliënt for banks. 'We've
certainly come a very long way from the
early years,' Litjens laughs. 'No one
wanted us then. Fortunately, we met up
with Sjouke Postma. At that time,
Rabobank was the only bank willing to
give us the financial backing we needed at
reasonable rates. Perhaps their willingness
to help was our agri-orientation. In fact,
we were working for companies that were
also Rabobank clients.'
Litjens says the Unisono team appreciates
the inherent understanding of food and
agribusiness in the bank. 'And also the
fact that everyone seems truly interested in
what we are doing.' When asked, Litjens
can only think of one area where the bank
could do more: commercial finance. 'But
that won't last forever,' he believes. 'I
forecast that within the next five years
we'll see far more commercially viable
projects getting off the ground - with
Rabobank in on the co-finance.'