Asset Backed Commercial Paper Conduit

The video discusses the purpose of asset backed commercial paper.  This is a vehicle used by companies to convert their accounts receivables into cash in an expeditious manner.  He illustrates the structure that is put into place to create this security.  A conduit is formed as an intermediary between the company The video discusses the purpose of asset backed commercial paper.  This is a vehicle used by companies to convert their accounts receivables into cash in an expeditious manner.  He illustrates the structure that is put into place to create this security.  A conduit is formed as an intermediary between the company and the investors.  The conduit purchases the accounts receivables from the company and sells commercial paper to investors to transfer the risk from the company to the conduit to the investors. 

Essentially, investors will fund the purchase of the accounts receivables through the purchase of commercial paper from the asset backed conduit.  Once the actual cash flows begin on the receivables, they are passed through the conduit back to the investors.  The conduit will take a servicing fee for performing this function.