Trust Company Gets Nod for Boring Cash-Raising Notes
Published Date: 2/6/2025
Notice
Summary
The Depository Trust Company (DTC) got the green light to raise extra cash by issuing senior notes, which helps keep the financial system safe and smooth. This change affects DTC and anyone relying on its services, with new funds coming in regularly through private sales. The plan was reviewed carefully and approved by the SEC by early 2025, so expect stronger financial backup soon!
Analyzed Economic Effects
4 provisions identified: 4 benefits, 0 costs, 0 mixed.
Authority to Issue $3 Billion Debt
DTC is authorized to raise prefunded liquidity by issuing and privately placing up to $3 billion in senior notes to qualified institutional investors. The notes will be sold periodically through private placements and the aggregate issuance would not exceed $3,000,000,000.
Funds Held as Qualifying Liquid Resources
Proceeds from any debt issuance would be held in DTC's cash deposit account at the Federal Reserve Bank of New York or at creditworthy banks and counted as qualifying liquid resources. DTC represented it would use these proceeds only to help complete system-wide settlement if a Participant defaults.
Diversifying Liquidity, Reducing Reliance
The Debt Issuance is intended to diversify DTC's sources of default liquidity and reduce reliance on its committed 364-day Line of Credit, which is renewed annually. Diversifying sources is meant to lower the risk that DTC cannot secure required liquidity if the Line of Credit is not renewed at target amounts.
Investor Terms: 2–10 Year Senior Notes
DTC expects senior notes to be unsecured, unsubordinated, non-convertible, and issued in book-entry form with interest set at fixed or floating market rates. The average maturity would be no shorter than approximately two years and no longer than approximately ten years, and DTC may prepay principal before maturity.
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