U.S. Central Creates Financing Conduit, Sandlot Funding LLC
OVERLAND PARK, Kan. -- In mid-April U.S. Central became the administrator of Sandlot Funding LLC, an asset-backed commercial paper financing conduit.
U.S. Central anticipates that Sandlot Funding will be a source of additional liquidity and fee income, according to a letter U.S. Central sent to corporates.
According to the Asset-Backed Commercial Paper Market Review from Moody's, Sandlot Funding has the ability to issue up to $10 billion. Sandlot will issue secured liquidity notes and invest in a variety of highly-rated asset backed and mortgage-backed securities. According to Moody's, at least 90% of Sandlot Funding's assets must be AAA/Aaa rated and can not be lower than A/A2. Ten-percent can be in assets not rated by Moody's, which could include corporate bonds and collateralized debt obligations. Sandlot will focus on liabilities maturing in less than one year.
The funding structure allows U.S. Central to earn arbitrage by swapping out one asset for another. It's a common funding structure agreement used today by large banks and financial companies, but is the first of its kind in the corporate network
In an investor presentation, U.S. Central describes Sandlot Funding as "merely an extension" of its current business.
"U.S. Central continuously looks for ways to leverage its expertise for the benefit of the corporate network. Sandlot Funding LLC is just one example of those efforts," said U.S. Central CEO Francis Lee.
Corporate One CEO Lee Butke praised the move. "Anything that can bring outside liquidity into the system is a positive. U.S. Central should be in the national markets," said Butke.