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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: Oblomov who wrote (10611)10/7/2001 3:27:20 PM
From: Ilaine  Read Replies (1) of 74559
 
Unsecured, but still backed in the sense that it can only be used to fund current transactions, thus must be backed with cash flow.

>>That proceeds from commercial paper issues be used to finance "current transactions," which
include the funding of operating expenses and the funding of current assets such as
receivables and inventories. Proceeds cannot be used to finance fixed assets, such as plant
and equipment, on a permanent basis. The SEC has generally interpreted the current
transaction requirement broadly, approving a variety of short-term uses for commercial paper
proceeds as proceeds are not traced directly from issue to use. Firms are required to show
only that they have a sufficient "current transaction" capacity to justify the size of the commercial
paper program (for example, a particular level of receivables or inventory). Firms are allowed to
finance construction as long as the commercial paper financing is temporary and to be paid off
shortly after completion of construction with long-term funding through a bond issue, bank loan,
or internally generated cash flow. <<

toerien.com

As for macro situation overall, it remains murky, and troubling, but these are unusual times. All we know about economics we learned by looking at the past. There are no immutable physical laws involved here.
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