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What Is Commercial Paper? Definition, Purpose & History

What Is Commercial Paper?Commercial paper is a type of debt issued by a company that can serve as a source of funding for its operations. Money raised…



Commercial paper is a type of unsecured debt that businesses issue to raise funds because they tend to be a cheaper form of borrowing than bank loans.


What Is Commercial Paper?

Commercial paper is a type of debt issued by a company that can serve as a source of funding for its operations. Money raised from commercial paper can be used to meet short-term needs, such as payroll, inventory finance, or payment for raw materials. Companies often prefer commercial paper to bank loans, which tend to carry higher interest rates.

Commercial paper is a type of unsecured debt, which means it isn’t backed by assets or other types of collateral. Instead, issuers have lines of credit from banks to back the debt. Just as a person’s eligibility for a credit card is based on their credit score, a company’s ability to issue commercial paper is based on its creditworthiness.

In the commercial paper market, the company issuing the debt is usually perceived to be low risk. Still, ratings agencies such as Moody’s and Fitch issue credit ratings on the commercial paper to be sold as a measure of potential investment for prospective buyers. The typical issuer of commercial paper is a large corporation with a strong credit rating.

How Long Does Commercial Paper Take to Mature?

Commercial paper can have a maturity as short as overnight or as long as 270 days. The duration is significant because any debt with a maturity exceeding 270 days must be registered with the Securities and Exchange Commission (SEC). So, a company issuing millions of dollars in commercial paper doesn’t have to face the scrutiny of the SEC if their debt matures in 270 days or fewer. Since commercial paper has a duration of less than a year, it is recognized as a liquid asset.

The average duration of a commercial paper is 30 days, according to the Federal Reserve. That being said, it is common for companies to roll over their commercial paper when they are due by issuing new paper.

A Brief History of Commercial Paper

Commercial paper reportedly originated in the U.S. in the 1700s, and its widespread use as a debt facility gained traction in the 1800s when businesses—typically requiring funds for inventory—started issuing promissory notes on paper.

Investment banking giant Goldman Sachs traces its origin and prominence in the commercial paper market to founder Marcus Goldman, who first sold promissory notes in 1869. He built up relations with small business owners such as wholesale jewelers and leather merchants in Lower Manhattan and helped them issue commercial paper based on their creditworthiness.

In the first year of operations, as an intermediary between borrowers and institutional lenders, he led transactions totaling $5 million (the equivalent of $111 million in 2023). In the 1970s, Goldman Sachs was the biggest dealer in the U.S. commercial paper market.

While commercial paper is largely unsecured debt, some corporations use assets—such as receivables—as collateral, and this is known as asset-backed commercial paper (ABCP). It typically has maturity durations of 90 to 180 days. Transactions of ABCPs picked up in the 1990s, and these helped to push the value of the U.S. commercial paper market up to a record $2.2 trillion in July 2007.

Transactions for ABCPs declined during the financial crisis of 2007–2008 because ABCPs were used to fund longer-term asset-backed securities, of which their credit ratings were questionable, and issuers had difficulty rolling over their debt as the market for those securities collapsed. The Federal Reserve Board temporarily set up a commercial paper funding facility (CPFF) on October 27, 2008, to address liquidity concerns by buying commercial paper.

Fed data showed that the outstanding value of U.S. commercial paper exceeded $1.25 trillion at the end of 2022. (In comparison, the total value of the U.S. debt market was about $30 trillion.) Still, the commercial paper market is up from about $951 million in late 2020, during the height of the COVID-19 pandemic. The Fed for the second time opened up the CPFF on March 17, 2020, for the purchase of commercial paper during the pandemic. This was a way to keep money flowing into the economy by allowing companies that might be distressed to raise funds. The CPFF stopped buying commercial paper a year later.

Who Are the Important Participants in the Commercial Paper Market?

There are generally three major players in the commercial paper market: those who issue, those who purchase, and those who deal.


These are corporations and financial institutions. Typically, the bulk of commercial paper issuance comes from banks and finance companies that are raising funds. Sovereign governments also sell commercial paper from time to time.


Investors include mutual funds, foreign corporations, pension funds, and state and local governments that seek to diversify their holdings.


Typically, the biggest investment banks and securities firms deal the commercial paper because they have clients who both sides of the transaction: buyers and sellers. There is no official list of commercial paper dealers as there is for primary dealers of government debt. When the Fed set up the CPFF, most of the commercial dealers listed were also primary dealers.

How Is Commercial Paper Issued, Sold, Purchased & Redeemed?

A company seeking to sell commercial paper does so through a dealer that serves as an intermediary between it and the dealer’s clients, the buyers. For example, an automobile manufacturer wants to raise $50 million to pay bonuses to management on what is expected to be a record quarter in sales. It can’t get money quick enough, so the automaker turns to commercial paper for immediate funding and wants to pay the face value of the paper in 90 days. A dealer works with the issuer to set the discount rate and finds buyers. Investors buy the commercial paper but must wait 90 days to receive their money back, with interest.

The dealer makes money from the transaction by buying the commercial paper from the debtor and selling it at a higher price to investors, pocketing the difference. Thus, commercial paper rates tend to be a bit higher than Treasuries with similar maturities to account for the dealer’s profit.

Commercial paper works like fixed-income investments but tends to have rates higher than Treasuries with similar maturities, and even higher than bank savings deposit rates.

How Are Interest Rates on Commercial Paper Calculated?

When a company issues commercial paper that is due, for example, in 270 days, the company agrees to pay back the face value at the end of 270 days. It sells the commercial paper at a discount, or below par value, and it buys the paper back at face value. The difference is the interest earned by the investor (and the price paid by the issuer for the temporary use of the buyer’s funds).

What Are the Differences in Commercial Paper Internationally?

The U.S. has the biggest market in commercial paper, and is designated abroad as U.S. commercial paper (USCP). While other countries may have their own commercial paper market, commercial paper issued internationally is known as Eurocommercial paper (ECP), but the debt can be in any currency denomination. The other big markets for commercial paper are in Canada and the U.K.

Eurocommercial doesn't face the scrutiny of the SEC and isn’t limited by the 270-day maturity duration that would trigger oversight. Typically, the length of maturity for Eurocommercial paper can be as long as 364 days, or less than a year.

Frequently Asked Questions (FAQ)

The following are answers to some of the most common questions investors ask about commercial paper.

What Are the Differences Between Commercial Paper and Bonds?

Unlike bonds, which can be redeemed at any time, investors in commercial paper must wait to be paid out at maturity. Like most types of bonds, taxes must be paid on any interest earned.

Who Are the Biggest Issuers of Commercial Paper?

Banks and finance companies are among the biggest issuers of commercial paper.

Who Are the Biggest Holders of Commercial Paper?

Money market mutual funds, corporations, and state and local governments are among the biggest holders of commercial paper.

What Is Asset-Backed Commercial Paper?

Some companies use assets as collateral for their commercial paper offerings, and this is known as asset-backed commercial paper. Its maturity durations are typically 90 to 180 days.

What Is Credit-Supported Commercial Paper?

Credit-supported commercial paper is typically backed by a bank, which agrees to pay the face value of the debt if the issuer does not. 

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Four burning questions about the future of the $16.5B Novo-Catalent deal

To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.
Beyond spending billions of dollars to expand…



To build or to buy? That’s a classic question for pharma boardrooms, and Novo Nordisk is going with both.

Beyond spending billions of dollars to expand its own production capacity for its weight loss drugs, the Danish drugmaker said Monday it will pay $11 billion to acquire three manufacturing plants from Catalent. It’s part of a broader $16.5 billion deal with Novo Holdings, the investment arm of the pharma’s parent group, which agreed to acquire the contract manufacturer and take it private.

It’s a big deal for all parties, with potential ripple effects across the biotech ecosystem. Here’s a look at some of the most pressing questions to watch after Monday’s announcement.

Why did Novo do this?

Novo Holdings isn’t the most obvious buyer for Catalent, particularly after last year’s on-and-off M&A interest from the serial acquirer Danaher. But the deal could benefit both Novo Holdings and Novo Nordisk.

Novo Nordisk’s biggest challenge has been simply making enough of the weight loss drug Wegovy and diabetes therapy Ozempic. On last week’s earnings call, Novo Nordisk CEO Lars Fruergaard Jørgensen said the company isn’t constrained by capital in its efforts to boost manufacturing. Rather, the main challenge is the limited amount of capabilities out there, he said.

“Most pharmaceutical companies in the world would be shopping among the same manufacturers,” he said. “There’s not an unlimited amount of machinery and people to build it.”

While Novo was already one of Catalent’s major customers, the manufacturer has been hamstrung by its own balance sheet. With roughly $5 billion in debt on its books, it’s had to juggle paying down debt with sufficiently investing in its facilities. That’s been particularly challenging in keeping pace with soaring demand for GLP-1 drugs.

Novo, on the other hand, has the balance sheet to funnel as much money as needed into the plants in Italy, Belgium, and Indiana. It’s also struggled to make enough of its popular GLP-1 drugs to meet their soaring demand, with documented shortages of both Ozempic and Wegovy.

The impact won’t be immediate. The parties expect the deal to close near the end of 2024. Novo Nordisk said it expects the three new sites to “gradually increase Novo Nordisk’s filling capacity from 2026 and onwards.”

As for the rest of Catalent — nearly 50 other sites employing thousands of workers — Novo Holdings will take control. The group previously acquired Altasciences in 2021 and Ritedose in 2022, so the Catalent deal builds on a core investing interest in biopharma services, Novo Holdings CEO Kasim Kutay told Endpoints News.

Kasim Kutay

When asked about possible site closures or layoffs, Kutay said the team hasn’t thought about that.

“That’s not our track record. Our track record is to invest in quality businesses and help them grow,” he said. “There’s always stuff to do with any asset you own, but we haven’t bought this company to do some of the stuff you’re talking about.”

What does it mean for Catalent’s customers? 

Until the deal closes, Catalent will operate as a standalone business. After it closes, Novo Nordisk said it will honor its customer obligations at the three sites, a spokesperson said. But they didn’t answer a question about what happens when those contracts expire.

The wrinkle is the long-term future of the three plants that Novo Nordisk is paying for. Those sites don’t exclusively pump out Wegovy, but that could be the logical long-term aim for the Danish drugmaker.

The ideal scenario is that pricing and timelines remain the same for customers, said Nicole Paulk, CEO of the gene therapy startup Siren Biotechnology.

Nicole Paulk

“The name of the group that you’re going to send your check to is now going to be Novo Holdings instead of Catalent, but otherwise everything remains the same,” Paulk told Endpoints. “That’s the best-case scenario.”

In a worst case, Paulk said she feared the new owners could wind up closing sites or laying off Catalent groups. That could create some uncertainty for customers looking for a long-term manufacturing partner.

Are shareholders and regulators happy? 

The pandemic was a wild ride for Catalent’s stock, with shares surging from about $40 to $140 and then crashing back to earth. The $63.50 share price for the takeover is a happy ending depending on the investor.

On that point, the investing giant Elliott Investment Management is satisfied. Marc Steinberg, a partner at Elliott, called the agreement “an outstanding outcome” that “clearly maximizes value for Catalent stockholders” in a statement.

Elliott helped kick off a strategic review last August that culminated in the sale agreement. Compared to Catalent’s stock price before that review started, the deal pays a nearly 40% premium.

Alessandro Maselli

But this is hardly a victory lap for CEO Alessandro Maselli, who took over in July 2022 when Catalent’s stock price was north of $100. Novo’s takeover is a tacit acknowledgment that Maselli could never fully right the ship, as operational problems plagued the company throughout 2023 while it was limited by its debt.

Additional regulatory filings in the next few weeks could give insight into just how competitive the sale process was. William Blair analysts said they don’t expect a competing bidder “given the organic investments already being pursued at other leading CDMOs and the breadth and scale of Catalent’s operations.”

The Blair analysts also noted the companies likely “expect to spend some time educating relevant government agencies” about the deal, given the lengthy closing timeline. Given Novo Nordisk’s ascent — it’s now one of Europe’s most valuable companies — paired with the limited number of large contract manufacturers, antitrust regulators could be interested in taking a close look.

Are Catalent’s problems finally a thing of the past?

Catalent ran into a mix of financial and operational problems over the past year that played no small part in attracting the interest of an activist like Elliott.

Now with a deal in place, how quickly can Novo rectify those problems? Some of the challenges were driven by the demands of being a publicly traded company, like failing to meet investors’ revenue expectations or even filing earnings reports on time.

But Catalent also struggled with its business at times, with a range of manufacturing delays, inspection reports and occasionally writing down acquisitions that didn’t pan out. Novo’s deep pockets will go a long way to a turnaround, but only the future will tell if all these issues are fixed.

Kutay said his team is excited by the opportunity and was satisfied with the due diligence it did on the company.

“We believe we’re buying a strong company with a good management team and good prospects,” Kutay said. “If that wasn’t the case, I don’t think we’d be here.”

Amber Tong and Reynald Castañeda contributed reporting.

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Petrina Kamya, Ph.D., Head of AI Platforms at Insilico Medicine, presents at BIO CEO & Investor Conference

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb….



Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

Credit: Insilico Medicine

Petrina Kamya, PhD, Head of AI Platforms and President of Insilico Medicine Canada, will present at the BIO CEO & Investor Conference happening Feb. 26-27 at the New York Marriott Marquis in New York City. Dr. Kamya will speak as part of the panel “AI within Biopharma: Separating Value from Hype,” on Feb. 27, 1pm ET along with Michael Nally, CEO of Generate: Biomedicines and Liz Schwarzbach, PhD, CBO of BigHat Biosciences.

The session will look at how the latest artificial intelligence (AI) tools – including generative AI and large language models – are currently being used to advance the discovery and design of new drugs, and which technologies are still in development. 

The BIO CEO & Investor Conference brings together over 1,000 attendees and more than 700 companies across industry and institutional investment to discuss the future investment landscape of biotechnology. Sessions focus on topics such as therapeutic advancements, market outlook, and policy priorities.

Insilico Medicine is a leading, clinical stage AI-driven drug discovery company that has raised over $400m in investments since it was founded in 2014. Dr. Kamya leads the development of the Company’s end-to-end generative AI platform, Pharma.AI from Insilico’s AI R&D Center in Montreal. Using modern machine learning techniques in the context of chemistry and biology, the platform has driven the discovery and design of 30+ new therapies, with five in clinical stages – for cancer, fibrosis, inflammatory bowel disease (IBD), and COVID-19. The Company’s lead drug, for the chronic, rare lung condition idiopathic pulmonary fibrosis, is the first AI-designed drug for an AI-discovered target to reach Phase II clinical trials with patients. Nine of the top 20 pharmaceutical companies have used Insilico’s AI platform to advance their programs, and the Company has a number of major strategic licensing deals around its AI-designed therapeutic assets, including with Sanofi, Exelixis and Menarini. 


About Insilico Medicine

Insilico Medicine, a global clinical stage biotechnology company powered by generative AI, is connecting biology, chemistry, and clinical trials analysis using next-generation AI systems. The company has developed AI platforms that utilize deep generative models, reinforcement learning, transformers, and other modern machine learning techniques for novel target discovery and the generation of novel molecular structures with desired properties. Insilico Medicine is developing breakthrough solutions to discover and develop innovative drugs for cancer, fibrosis, immunity, central nervous system diseases, infectious diseases, autoimmune diseases, and aging-related diseases. 

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Another country is getting ready to launch a visa for digital nomads

Early reports are saying Japan will soon have a digital nomad visa for high-earning foreigners.



Over the last decade, the explosion of remote work that came as a result of improved technology and the pandemic has allowed an increasing number of people to become digital nomads. 

When looked at more broadly as anyone not required to come into a fixed office but instead moves between different locations such as the home and the coffee shop, the latest estimate shows that there were more than 35 million such workers in the world by the end of 2023 while over half of those come from the United States.

Related: There is a new list of cities that are best for digital nomads

While remote work has also allowed many to move to cheaper places and travel around the world while still bringing in income, working outside of one's home country requires either dual citizenship or work authorization — the global shift toward remote work has pushed many countries to launch specific digital nomad visas to boost their economies and bring in new residents.

Japan is a very popular destination for U.S. tourists. 


This popular vacation destination will soon have a nomad visa

Spain, Portugal, Indonesia, Malaysia, Costa Rica, Brazil, Latvia and Malta are some of the countries currently offering specific visas for foreigners who want to live there while bringing in income from abroad.

More Travel:

With the exception of a few, Asian countries generally have stricter immigration laws and were much slower to launch these types of visas that some of the countries with weaker economies had as far back as 2015. As first reported by the Japan Times, the country's Immigration Services Agency ended up making the leap toward a visa for those who can earn more than ¥10 million ($68,300 USD) with income from another country.

The Japanese government has not yet worked out the specifics of how long the visa will be valid for or how much it will cost — public comment on the proposal is being accepted throughout next week. 

That said, early reports say the visa will be shorter than the typical digital nomad option that allows foreigners to live in a country for several years. The visa will reportedly be valid for six months or slightly longer but still no more than a year — along with the ability to work, this allows some to stay beyond the 90-day tourist period typically afforded to those from countries with visa-free agreements.

'Not be given a residence card of residence certificate'

While one will be able to reapply for the visa after the time runs out, this can only be done by exiting the country and being away for six months before coming back again — becoming a permanent resident on the pathway to citizenship is an entirely different process with much more strict requirements.

"Those living in Japan with the digital nomad visa will not be given a residence card or a residence certificate, which provide access to certain government benefits," reports the news outlet. "The visa cannot be renewed and must be reapplied for, with this only possible six months after leaving the countr

The visa will reportedly start in March and also allow holders to bring their spouses and families with them. To start using the visa, holders will also need to purchase private health insurance from their home country while taxes on any money one earns will also need to be paid through one's home country.

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