bank line of credit serving as an alternate source of liquidity for an issuer of commercial paper, and a source of credit for the buyer, or purchaser in the event the issuer is unable to rollover the paper at maturity. The amount of backup varies from as little as 50% for some AAA rated issuers to 100% for lower quality paper. Ordinarily, the line is a confirmed letter of credit or a contractual facility (revolving credit agreement or revolving underwriting facility) in place at issue time. Or, it may be cash set aside by the issuer. Abank line typically is a swingline. Bank credit lines are paid for by compensating balances or by straight fee.
bank line of credit in the name of an issuer of commercial paper, covering maturing notes in the event that new notes cannot be marketed to replace them. Ideally, the unused line should always equal the commercial paper outstanding. In practice, something less than total coverage is commonplace, particularly because the compensating balances normally required in support of the line are also available to meet maturing paper.
